Since the dollar makes up over half of the basket, the Kuwaiti dinar has closely followed the exchange rate fluctuations of the U.S. dollar over the past year. Structural Policies Kuwait's government plays a dominant role in the local economy, which may diminish if moves toward privatization and rationalization of the economy are implemented. Kuwait's economy is heavily regulated, which restricts participation and competition in a number of sectors and strictly controls the roles of foreign capital and expatriate labor. Income taxes, for instance, are only levied on foreign corporations and foreign interests in Kuwaiti corporations, at maximum rates of 55 percent of taxable income. Individuals are not subject to income taxes, but the Kuwait government is considering possible changes to its current income tax structure.
Foreign investment is welcome in Kuwait for minority partnership in select sectors.
The government of Kuwait is reviewing current legislation affecting foreign investment and it is thought the recommendations from the study will allow increased foreign ownership in Kuwaiti firms. Government procurement policies specify local products, when available, and prescribe a 10 percent price advantage for local companies on government tenders. There is also a blanket agency requirement for all foreign companies trading in Kuwait to either engage a Kuwaiti agent or establish a Kuwaiti company with majority Kuwaiti ownership and management. There are no customs duties on food, agricultural items and essential consumer goods. Imports of some machinery, most spare parts and all raw materials are exempt from customs duties.