Kuwait has postponed implementation of value added tax (VAT) on consumable services to 2020.

The move comes as Kuwait has voted in a new parliament hostile to austerity measures such as removal of subsidies and implementation of taxation.

Concerns by members of the finance ministry’s economic committee to exempt certain consumables from taxation is behind the move, reported local news service Al-Shahed daily.

“Kuwait will not be the most enthusiastic to implement the VAT,” says Bahrain-based economist Jasim Husain.

“Authorities are aware of the mood in the parliament, which will be convening in 10 days or so, so they want to send a message that they are prepared to make a deal.”

Two days after Kuwait’s election, the finance ministry had announced that it would double staff employed at the tax department from 300 to 600 to help implement the VAT policy.

VAT is expected to be introduced in all the GCC countries from January 2018 at the standard rate of five per cent with some exemptions in basic food and medicine as well as a zero rating for some goods and services, says Raghu Mandagolathur, senior vice-president of research at Kuwait-based Markaz.

As Kuwait considers rolling back its austerity measures, the burden of taxation is likely to be transferred to its expatriates, who comprise 70 per cent of the country’s 4.3 million population.

“They may put on hold some of the proposals to increase utilities fees on locals,” adds Husain.

“They’re going to start a lot with the expats, which is quite sad really because they’re going to be the scapegoats and in any case, elsewhere in the GCC it’s the same.

“I don’t think there will be taxes on remittances…utilities for sure, health, more fees for working permits, new airport taxes besides cutting and delaying capital expenditure.”