Bahrain - Eight fundamental principles, mainly keeping VAT as it is and increasing ‘sin tax’, have been reached between the government and legislators.

The consensus was reached at an urgent extraordinary high-profile meeting yesterday between ministers headed by Finance and National Economy Minister Shaikh Salman bin Khalifa Al Khalifa, MPs headed by National Assembly and Parliament Speaker Ahmed Al Musallam and Shura Council members headed by Chairman Ali Saleh Al Saleh.

Shaikh Salman expressed his sincere appreciation to members of the legislative authority for their constructive co-operation and continuous efforts to serve national interests.

He affirmed that the meetings between the two authorities have been productive, demonstrating mutual seriousness and responsibility in achieving the intended goals.

The agreed points that would form the foundation of the new 2025-2026 national state budget:

1. No increase in VAT: To maintain economic stability and shield citizens from additional financial burdens, the government confirmed that the Value-Added Tax (VAT) rate will remain unchanged.

2. Enhancing pensioners’ living standards: Recognising the importance of financial security for retirees, the budget will retain the cost-of-living allowance for pensioners introduced in the 2023-2024 budget, with an additional increase in the 2025-2026 cycle.

3. Investing in key public services: A substantial allocation has been made to improve public services, including housing, education, infrastructure, and healthcare:

Housing projects: A record-breaking BD800 million will be dedicated to housing projects to ensure immediate access to housing services and reduce waiting lists. This includes private sector partnerships to expedite development.

Education: A focus on hiring qualified Bahraini educators, updating curricula and expanding educational services.

Infrastructure: Construction of new schools in expanding residential areas, restoration of historic schools, and enhancements to roads and sewage networks.

Healthcare: An investment of BD688m to enhance medical services and facilities.

Job creation and economic empowerment: Employment remains a top priority, with initiatives designed to create opportunities for Bahrainis. This will include creating 25,000 job opportunities per year, new programmes targeting the employment of 8,000 fresh graduates annually and support through the Labour Fund (Tamkeen) for 50,000 Bahrainis per year in training and financing programmes.

4. Reducing government operational costs: To ensure fiscal responsibility, ministries and government agencies will be required to cut recurring expenses by at least five per cent.

5. Low-income support: Providing direct cash support to low-income citizens in case of any adjustments to the prices of subsidised goods during the budget cycle.

6. New revenue streams and corporate responsibility: In a bid to strengthen financial sustainability, the government plans to introduce new tax regulations:

Corporate taxes on companies exceeding a certain revenue threshold.

Incentives for businesses that prioritise hiring Bahrainis.

Increased selective taxes on energy drinks, sugary beverages, and tobacco.

Introduction of carbon emission fees for companies.

7. Sustainable urban development: The budget includes initiatives to encourage the development of commercial and investment lands that remain unused, ensuring more effective urban expansion.

8. Deficit reduction strategies: To maintain fiscal stability, the government has outlined strategies to manage financial deficits and secure funding for necessary expenditures.

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