1.1. Each country needs to have financial resources to perform its different types of activities, and in our modern era, a country may obtain the required fund from different resources such as from its natural resources, taxes, fees, fines, printing money and foreign aids.
1.2. The traditionals believe that these resources are only a method to cover public expenditures. Accordingly, the country was not allowed to utilise these revenues for any other purpose except the desired one, nor to collect more than the amount required to cover these public expenses. They see that public expenditure is the only justification for collecting public revenues which at the same time determines its scope.
1.3. As for the modernists, they noticed the vast expansion of the state functions and the need to increase the utilisation of public revenues. The aim is not limited any more to cover the public expenditures, but it was expanded to include their usage as one of the government interference instruments in the economic and social fields.
1.4. The State of Kuwait obtains financial resources from different sources in order to meet the public needs and to develop the society in the economic and social fields. Oil is one of the most important resources, for it is considered to be the main financial resource of the State and the second most important source after oil is the services revenues which are collected against services offered by the State. Then come taxes and international trade and transactions fees. Currently, the State is working to increase its non -oil revenues by raising taxes and fees.
2.1. Public revenues are defined as the gross sum of money collected by the government from the natural wealth resources and the income of its property as a result of selling, buying, leasing and duties collected for the services it performs.
2.2. The state revenues are classified into two main sections :
First : Sovereign Revenues
Second : Economical Revenues
(1) Sovereign revenues are those that are collected compulsorily by the government as a contribution to the expenditures of the public services. It consist mainly of taxes, fees and duties, fines and utilisation fees imposed due to the use of the national wealth, both natural and the public utilities, which serve the citizen.
3.1. Article No. (134) of the State of Kuwait constitution states that "Establishment of the public taxes, amendments or cancellation should be by a law, no one is exempted from a part or all of it except to the cases mentioned in the law and no one is asked to pay any other taxes, fees or costs except within the law limits".
4.1.1. It means the state's financial levy to be collected from individuals without anything paid in return.
4.1.2. The Article No. (48) of the State of Kuwait constitution states that tax and costs are a duty according to the law and no one is exempted from all or part of them except by law.
A Direct taxes :
4.1.3. In Kuwait it is limited to income tax only. It was first applied in Kuwait in 1951 when the decree of "Kuwait Income Tax" was issued, then the decree No. 3 dated on 10-10-1955 was issued to replace the 1951 decree. The decree No. 3 had some amendments, the first amendment was the decree No. (2) for the year 1957 and the last was the law No. (34) for the year 1970.
4.1.4. The "Kuwait Income Tax Decree" stated in its articles (1) and (2) that this tax is imposed on each "body corporate" formed and registered under the laws of any country or state. In 1955 the Director of Income Taxes interpreted the term "body corporate " as any body corporate that has independent entity.
4.1.5. The taxation director mentioned a notice saying "Since there is at present no Law in the Kuwait which provides for the formation and registration of such associations, the term " Body Corporate " can be applied only to companies or other associations registered abroad".
4.1.6. Article No. (2), paragraph (f ) of the Kuwait Income Tax Decree of 1995 amended by the decree No. (2) for the year 1957 indicates that the term " body corporate " wheresoever incorporated carrying on trade or business in Kuwait includes any corporate carrying on trade or business in Kuwait either directly or through an agent and also any body corporate carrying on trade or business in Kuwait as an Agent for others.
4.1.7. The conclusion is that individuals are not subject to the income tax in the state of Kuwait regardless to their nationalities and that means that the income tax is only limited to every body corporate registered abroad.
4.1.8. Paragraph (H), Article No. (2) of the Kuwait Income Tax Decree identifies the word "Income" as gains and profits of a body corporate derived from carrying on trade or business in Kuwait.
4.1.9. Taxes are imposed on the net income after deducting the costs and expenses spent to earn that income.
4.1.10. Kuwait Income tax follows upgrading classes principle since the main text of paragraph (I), Article No. 2 of Kuwait Income Tax Decree states that the tax is to be upgraded according to the classes.
4.1.11. Article No.7 of the Kuwait Income Tax decree states that losses are to be carried forward and so far as may be, deducted as a set off against the amount of income in respect of that trade or/and business for the following taxable periods. Any relief under this Article shall be given as far as possible in the first subsequent taxable period within the said following taxable periods and so far as it cannot be so given then in the next taxable period and so on.
4.1.12. Article No. 10 of the mentioned decree authorises the Tax Director to administer and enforce this decree. He shall collect the income taxes due and pay them promptly to the Ruler. In case of failure to pay the amount of income tax on due date or at the end of extension period given, there shall be added to the amounts due, a fine amounting to one percent (1% ) for each delayed period or a part of it, and the fine is to be calculated for the accrued instalment and not the total sum.
4.1.13. The decree grants the Tax Director the right not to impose penalties on the delayed tax payer if he is convinced with the reasons of the delay.
4.1.14. Article No. 13 of the same decree states that any dispute between the Director and the tax payer arising in respect of the administration of this Decree, or of the amount of income tax due thereunder, may be referred by either party to the Courts for adjudication, unless both parties agree to submit the dispute to arbitration.
B Indirect tax :
4.1.15. A decree by law No. 13 for the year 1980 concerning customs was issued to clarify through its second article that all goods and materials imported to Kuwait shall be subject to custom taxes, except what has been excluded by another decree. The decree by the law gives the Minister of Finance the right to issue the required rules and regulations to carry out the decree, and some different ministerial resolutions were issued in that respect.
4.2.1. They are charges and financial costs levied by the state for the use of public facilities..
5.1. The economical revenues are represented in the revenues collected by the state as a legal entity which owns the national wealth and offers services in the fields of commercial, industrial and agricultural projects which earns profits from them.
5.2. Article No. 21 of the Constitution states that "All natural wealth and its revenue are owned by the state, and the State shall protect and use it according to the national security and the national economy" The oil wealth represents the major resource for the economical revenues in the State of Kuwait. These revenues include selling crude oil and natural gas.
Revenues of State property
5.3. These are the revenues collected by the state against the use of its property by another party. The Ministry of Finance supervises the lease and use of the State property. These revenues include :
5.4. In addition there are agricultural and fishery wealth revenues which are under the supervision of the Public Authority for Agriculture and Fishery Resources.
5.5. Investments represent the surplus owned by the State and invested in shares, bonds, local and foreign projects and the loans offered by the State. The state collects revenues from earned profits, interests of these investments and loans.
5.6. The Public Authority for Investment, according to its establishing Law No. 47 for the year 1982 manages, in the name and the account of Kuwait Government, the investments of the state public fund reserve and also the funds allocated for the next generations reserve, and other funds assigned to the Authority to invest in investment projects which result in common benefit for the public. These investments are considered very important to develop the state resources and to minimise dependence on oil, the only resource of national income.
5.7. The state of Kuwait owns the electricity and water projects, telecommunication services, oil and its related industries companies and establishments, essential construction materials and other consumption industries such as Kuwait Flour Mills and Bakeries Company, National Industries Company, Fertilisers Company and other companies participating in meeting the needs of the society and developing its resources
6.1. Kuwait revenues are represented mainly by the oil revenues and other revenues represent a very small percent.
6.2. The following table shows percentages of oil and non-oil revenues to the gross revenues :
| Year | Oil revenue | Non-oil revenue |
| 1984/85 | 90.9% | 9.1% |
| 1985/86 | 89.3% | 10.7% |
| 1986/87 | 85.7 | 14.3% |
| 1987/88 | 88.4 | 11.6% |
| 1988/89 | 85.9% | 14.1% |
| 1989/90 | 90.8% | 9.2% |
| 1990/91 | 90.2% | 9.8% |
| 1991/92 | 76.6% | 23.4% |
| 1992/93 | 88.2% | 11.8% |
| 1993/94 | 83.8% | 16.2% |
| 1994/95 | 89.8% | 10.2% |
6.3. The above table indicates that oil revenue represents the biggest source of government revenues which ranged between 76.6% and 90.9%, while the non-oil revenue ranged between 9.1% and 23.4%.
6.4. During the years 1990/1991 and 1991/1992, Kuwait revenue was greatly decreased as a result of the Iraqi aggression and the destruction by fire of the oil wells. The percent of oil revenue in 1990/1991 compared with the preceding year was 8.3% and the percentage of oil revenue in 1991/1992 compared with 1989/1990 was 16.8%.
6.5. Oil rate decrease has a great effect upon the state financial resources. So, the state policy currently works to increase the non-oil government revenue and to find out new sources for revenue through reconsideration of several laws and resolutions that organise the revenues of budget chapters aiming to increase these revenues and to develop them to minimise the current state budget deficit.
6.6. Taxes are considered to be one of the revenues which form an important resource to the state that may, along with the oil resource, form a major supplier to the state general budget deficit. The state is reconsidering the current taxation systems, both direct and indirect, for it may represent an important resource to the non-oil revenues, especially since income tax which is applied now to the foreign companies in Kuwait does not have enough flexibility in its structure.
6.7. The government aims concerning this matter during the current phase implies the following procedures :
6.8. Accordingly , the current state directions move towards reviewing the public services pricing to bring the prices gradually closer to the production cost of the services.
7.1. The decree law No.31 for the year 1978 concerning the rules of preparing the budget and supervising its implementation , and the state final accounts in its article No. 28 explains that: " No funds shall be considered in the revenues or expenditure of the fiscal year unless it has been collected and expended actually during the fiscal year."
7.2. Accordingly the accounting principle that controls the revenues collection and its registration in the records in the State of Kuwait is the cash principle.
7.3. Each ministry and government department collects its own revenues , and the Finance Ministry collects the major amount of the revenues of the State of Kuwait. The financial regulations of the Finance Ministry clarifies methods of revenues collections which has different forms such as:
- Local cheques.
- External cheques.
7.4. Article (19) from the decree law No. 31 for the year 1978 shows that " Revenues that are collected by ministries and government departments shall be paid to the Finance Ministry according to the rules set up by the ministry".
8.1. Article No. 151 of the constitution of the State of Kuwait assigned the establishment of an independent financial control system aimed to exercise an effective control on the Public Funds to assure its safe guarding , avoiding loss and extravagance. This article stated that :
" There shall be established by law a commission for the financial control and its independence shall be safeguarded by the law and it shall be attached to the National Assembly. It shall assist both the Government and the National Assembly in collecting the State revenues..".
8.2. To implement this constitutional provision, law No.30 for the year 1964 concerning the establishment of the Audit Bureau has been issued. The second article includes the establishment's aims: "it shall be the basic aim of the Bureau to realise effective control over public funds by exercising the functions vested in it in accordance with and in the manner laid down in this Law."
8.3. The law has organised the establishment of the Audit Bureau in article No. (26) which stated, in regard to the way by which it shall exercise its functions, that :" The Bureau shall exercise its functions by means of inspection, examination and checking . Surprise inspections may take place ." Also article No. (27) lays down that :" The technical staff of the Bureau shall be charged with inspection , examination and checking required by the Bureau in exercising its function."
8.4. Article No. (8) of the same Law /determined the scope of the control of the State Audit Bureau on the revenues and it can be summarised in the following points:
8.5. In the course of exercising the control provided for in this article , the Bureau shall examine , check and inspect the documents, books and registers of public collections and entitlements in order to ascertain that financial dispositions and accounts entries pertaining to collection have been carried out in a proper and regular manner in accordance with the provisions of the financial and accountancy by-laws.
10.1. The following are auditing procedures and methods that are carried out by the State Audit Bureau to audit government revenues and while preparing the subsequent reports which include the findings resulting from inspection, examination and checking.
11.1. Through examination, checking, and reviewing, the State Audit Bureau prepares reports which include the findings within the concerned period. The most important reports are:
A) Periodical reports to the authorities at the end of the examination and checking
B) Annual report concerning the State final account of the past fiscal year which included the essential findings that were disclosed by the examinations of the authorities which are being audited by the State Audit Bureau, along with recommendations. This report is submitted to the State president (Amir) , The National Assembly, The Council of Ministers, and The Minister of Finance.
C) Other reports , the President of the State Audit Bureau may submit other reports during the year, on matters which in his opinion are of such importance and seriousness that they should be promptly considered.
11.2. The State Audit Bureau, in preparing these reports, takes into consideration the following points:
A. The availability of the conforming evidence:
That the report findings are being supported by the proper conforming evidence and firm indication depending on the applied laws or valid rules and regulations or the general principles. These findings should be reinforced with the supported documents.
B. Correlating between reviewing, examination and checking operations:
All the operation relating to reviewing, examination and checking the records are correlated to disclose the deviations and to ascertain corrective measures.
C. Disclose contraventions/reasons thereof and suggest corrective measures.
To make auditing operations effective it must not be limited to disclosing mistakes, but it mv.st also study the reasons for errors, and suggest corrective measures as soon as it is discovered in order to avoid damages resulting from delayed correction.
D. Some general principles that control the reports with findings of revenue auditing:
12.1. Developing revenues auditors skills and experiences is important because of its role in creating an effective auditing on government revenues, and making sure that all authorities concerned are applying the issued laws, resolutions and regulations, and to ascertain its effectiveness and the non existence of loopholes that lead to loss in the public funds .
12.2. The State Audit Bureau adheres to this ,through providing training courses, programs, seminars and workshops either conducted in the State Audit Bureau premises, or at specialised training companies in or outside the State of Kuwait in accordance with the identified training plan, and to follow them up to be sure of implementing the aims of these meetings , programmes etc., and to be aware of the progress achieved in building and developing skills, improving abilities, providing auditors with new ideas through presenting new auditing methods and systems, and the experiences of other auditing institutions related to this field, developing auditing systems, increasing its effectiveness , and sharing in developing government revenues.