Bahrain is set to adopt major changes to how excise or ‘sin’ taxes are calculated, after Gulf states agreed on a new unified system aimed at tightening enforcement and protecting public health.
Parliament will debate and vote on an urgent legislation to ratify amendments to the Unified Selective Tax Agreement on Tuesday.
The draft law was forwarded to MPs by His Royal Highness Prince Salman bin Hamad Al Khalifa, Crown Prince and Prime Minister. It aims to give governments more flexibility in setting tax rates on goods that are harmful to health and the environment as well as luxury items. Bahrain had originally ratified the GCC framework through Law No 39 of 2017. The new amendment updates key definitions and gives GCC finance authorities wider tools to set how excise tax is applied.
Instead of relying on a single method, the amendment allows three calculation options – a percentage of the value of the excise goods, a fixed amount per unit or a combination of percentage and fixed amount.
This flexibility is designed to help GCC states respond more effectively to price manipulation, smuggling risks and market distortions, while strengthening public health and environmental objectives.
A central change is to the definition of the ‘value of excise goods’. Previously, it was defined as the value on which the tax is calculated. The amendment revises this to the value on which the tax may be calculated, giving authorities discretion to determine the most appropriate basis depending on the product and market conditions.
The amendment also gives the GCC Financial and Economic Co-operation Committee clear authority to decide how excise tax should be applied and adjusted across member states. In addition, provisions that were previously scattered across different articles – particularly those relating to tax rates on harmful and luxury goods – have now been consolidated into a single updated framework, streamlining decision-making at the GCC level. The Cabinet says this will enhance economic integration, reduce loopholes exploited through cross-border pricing differences, and support unified enforcement.
If approved by MPs and the Shura Council following ratification by His Majesty King Hamad, the law will come into force the day after publication in the Official Gazette.
Given its direct link to taxation policy, cross-border trade and GCC obligations, the legislation has been classified as urgent.
MPs are expected to vote to refer the draft to the financial and economic affairs committee for detailed review before it returns to the chamber for debate.
Meanwhile, legislators are also set to debate and vote on the 2024 government’s closing financial statement and the 2024 Unemployment Fund closing statement. The financial and economic affairs committee, chaired by MP Ahmed Al Salloom, has recommended rejecting both.
In the case of the financial statement, the committee has cited unclear management planning and for the Unemployment Fund it referred to low investment revenues.
MPs will also scrutinise findings and recommendations related to the 2024-2025 National Audit Office report.
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