MANAMA: The Central Bank of Bahrain (CBB) has warned about the fallout of taxes on remittances and other 'foreign transactions'.
Such a move will damage national economy and may have serious implications for Bahrain’s hard-won image as a prized regional financial centre and an offshore banking hub, the regulatory authority said.
Parliament’s financial and economic affairs committee has endorsed a proposal by five MPs to levy fees on remittances to urgently find new revenue streams amidst global oil price slump.
The implementation of such a controversial proposal will take a heavy toll on the banking and trade sectors, the CBB pointed out.
The proposed measure also contradicts Bahrain’s official adopted policy which is based on a free market economy without any administrative constraints or financial levies, it said.
The logic of underlying fees involves a control of capital flow, which risks constraining financial transactions and curbing the smooth flow of capital in a deregulated economy, the CBB said.
Bahrain has built its reputation as a prized regional financial centre and a hub for offshore wholesale and retail banks, the regulatory authority said.
Levying fees would take a toll on operational costs of these banks and undermine Bahrain’s competitiveness and ability to attract more foreign financial institutions, it said.
The tax will also affect the expatriate community and push it to transfer money through unofficial channels.
The implemented official channels are in compliance with Bahrain’s obligations to enforce best world practices as part of efforts to combat money laundering and terror finance.
The proposal was initially proposed by the MPs, led by Mohammed Al Ahmed.
The GDN reported the parliamentary committee’s vice-chairman, Jalal Kadhem, as saying last month that new taxes for expats and the private sector could be introduced in Bahrain, in addition to subsidy cuts and other cost-cutting measures.
That includes proposed new rates for traffic registrations and inspections, fees for expatriate students at government schools and increased rates for unused plots of land, sewage services and road tax.
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