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THE government could gain up to BD490 million if the 10 per cent Value Added Tax (VAT) is fully implemented next year.
However, a conservative estimate of VAT revenues for 2022 remains at BD288m.
Shura Council financial and economic affairs committee chairman Khalid Al Maskati told the GDN that the conservative figure ensures the minimum budgetary commitment is met.
However, he added that higher VAT collections would be dependent on interchangeable economic variables that could exist next year, with the introduction of the new rate from January 1 2022.
Mr Al Maskati explained that the value of certain goods and services, for which contracts have already been signed, cannot be changed until new orders are made.
“VAT revenues would be at least 11.7pc of total government income next year,” said Mr Al Maskati.
“The minimum revenue would be BD288m under reasonable projections, which is the budgetary commitment.
“However, it could hit BD450m if the new 10pc rate is fully implemented for all goods and services.
“It all depends on the reorganisation of import and trade procedures.”
The Finance and National Economy Ministry has presented the Shura Council’s financial and economic affairs committee with records showing that VAT revenues were BD260m in 2019 and BD233m in 2020. New documents presented yesterday show VAT projections at BD272m at the end of this year.
Stability
The committee, on Wednesday, gave the green light to an amendment to the 2018 VAT Law to double the tax, and submitted a report to chairman Ali Saleh Al Saleh for inclusion during the chamber’s weekly session on Sunday.
This came after a meeting with Finance and National Economy Minister Shaikh Salman bin Khalifa Al Khalifa at the National Assembly Complex in Gudaibiya.
Mr Al Maskati said VAT has been doubled to ensure financial stability post Covid-19.
“Bahrain’s recovery from the dire financial impact of the coronavirus (Covid-19) pandemic is one of the best in the world, but additional measures are necessary,” he said.
“Ninety-four basic commodities continue to be exempted, while government services are VAT-free.
“Most of the VAT revenues come from big companies and expatriates and payments collected from Bahrainis are just 2pc of the total revenue.
“The global economic situation is unstable and solid revenues are necessary to push ahead with planned projects.”
On Tuesday, 23 MPs voted in favour of amending the 2018 VAT law to double the tax, 15 rejected it, one abstained and one MP was absent.
MPs also approved increasing social welfare and support allowances by 10pc from January 1, 2022, which will also be debated during Shura’s session on Sunday.
Under the new social welfare system to be implemented from January 1, a low-income Bahraini would receive BD77 monthly, a couple would receive BD132 up from the current BD120, and each child BD28 from BD25 with the BD150 cap removed for the total given to a family. While the government had earlier set aside BD21.5m for this purpose, an additional BD2.15m would be pumped in next year.
An additional BD15m will be set aside for the anti-inflation monthly allowance which increases by 10pc from the current BD50, BD70 and BD100 depending on family income.
Shura is also set to vote on a government-drafted legislation to join the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting.
Under it, the member country will swiftly implement a series of tax treaty measures to update international tax rules and reduce the opportunity for tax avoidance by multinational enterprises. It was approved by MPs last month.
They will also vote to reject amendments to the 2001 Municipal Law that would see municipal councillors and Capital Trustees Board members getting paid from the day they get elected or appointed.
Members will be also notified on a reply from Education Minister Dr Majid Al Nuaimi on a question by Sabah Al Dossary on criteria for teaching Arabic language in private schools.
mohammed@gdn.com.bh
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