The tax on goods and services – Value Added Tax (VAT) – is likely to be doubled from 5 per cent to 10pc.
It is amongst multiple options presented by the government yesterday to legislators to offset financial setbacks.
Other ‘less favourable’ suggestions include reducing wages, limiting social welfare given to nationals and even increasing VAT to 15pc.
A senior government delegation met MPs and Shura Council members to give an update on Bahrain’s economy and finances. A binding decision will be made shortly.
“Bahrain is at crossroads and that’s either drifting into further debt with borrowing reaching BD15 billion by the end of next year with no proper solutions or the government takes a choice from many tough options to correct the path,” said Parliament financial and economic affairs committee chairman Mahmood Al Bahrani.
“There is little choice when the options are between doubling VAT, reducing wages or ending social welfare.”
Yesterday’s urgent meeting was chaired by National Assembly and Parliament Speaker Fouzia Zainal.
It was attended by Finance and National Economy Minister Shaikh Salman bin Khalifa Al Khalifa, Industry, Commerce and Tourism Minister Zayed Alzayani, Labour and Social Development Minister Jameel Humaidan and Parliament and Shura Council Affairs Minister Ghanim Al Buainain.
“VAT seems to be the least painful option, as it would be BD50 for every BD500 on commodities with 94 basic commodities already continuing to be exempted alongside 1,400 government services,” said Mr Al Bahrani.
The exempted commodities since VAT was introduced in January 2019 include sugar, salt, wheat, rice and basic vegetables.
“If VAT is not imposed then it could result in 10pc wage cuts, or subsidies like fuel and electricity and water on Bahraini households could be axed,” added Mr Bahrani.
“VAT is the best option but it will require social welfare to be restructured to help affected citizens with additional living expenses.”
He believes that if the Bahraini authorities did not take necessary action now there could be a threat to the value of the currency, with dire results.
Mr Al Buainain said unity was necessary to overcome the impact of Covid-19 on the economy.
Recovery
“The road to economic recovery requires unity from everyone to avert any choice that may directly affect citizens,” said Mr Al Buainain. “We have to work together to continue providing citizens with opportunities in the economy.”
Mr Humaidan said a priority is for social welfare to reach affected Bahrainis in the upcoming period without disruption. “We are also keen on ensuring Bahrainis continue in jobs and creating job opportunities as the country recovers from the impact of Covid-19,” said Mr Humaidan.
“There are multiple options put on the table but, at the end of the day, the one chosen has to be the one that has the least effect on people.”
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