A NEW tax on infrastructure development could cost commercial developers hundreds of thousands of dinars extra for large projects, according to an MP opposed to the levy.
The tax was introduced earlier this month and imposes a levy of BD12 per construction square metre on private developers.
It drives up the cost of building, particularly for large multi-storey developments since it is based on the overall construction dimensions – not only ground floor space.
Money generated is intended to cover the cost of associated infrastructure work carried out by the government, such as road networks, sewage systems, electricity and water schemes.
However, the head of a parliamentary committee that wants to reduce the fee to BD3 per square metre has now approached the Cabinet to either delay or amend the tax.
“I have sent an appeal to the Premier to delay the levy or amend it so it takes into account the land’s area, rather than total construction,” public utilities and environment affairs committee chairman Hamad Al Dossary told a Press conference at the National Assembly yesterday.
“I think most investors who want to build in Bahrain will change their minds if this levy goes ahead and I already know of people who were aiming to build towers, but have stopped.
“In same cases, the fees reach BD200,000 or even BD250,000. This isn’t reasonable.
“We know the economic situation Bahrain is currently in and we’re aware that the Works, Municipal Affairs and Urban Planning Ministry needs money to be able to build the infrastructure.
“We understand that, but at the same time it needs to be somewhat reasonable.
“If this isn’t solved by the time parliament’s next term starts in October, we will put forward a proposed law.”
The new tax came into effect on July 9 having cleared both parliament and the Shura Council.
It was presented to the National Assembly as a decree and passed by parliament in November on a technicality, despite being opposed by 20 MPs – exactly half of the 40 elected members.
That was not enough to prevent it being referred to the Shura Council, which subsequently approved it.
Works, Municipal Affairs and Urban Planning Minister Essam Khalaf told MPs in November that the government was taking a fraction of infrastructure development and maintenance cost, unlike other GCC countries.
However, Mr Al Dossary said his committee was now studying amendments to the levy, which would bring down the cost for developers. They include only charging developers for each square metre of land on which a commercial project is built.
Another suggestion is to calculate the tax based on the size of the building’s facade.
“The whole levy relates to investment, but investors also need some relief at the end of the day,” said Mr Al Dossary.
“Either way, if he has to pay this levy he’ll pass on that tax to citizens or the person who buys the apartment or property, so Bahrainis will still be affected.
“One solution we want to explore is to charge per square metre of the land itself, not of the total construction, or to look at the front of the building.
“Speaking to developers, many say that’s where the infrastructure is actually focused.
“Either way, we need a solution because I think it will affect the price of real estate in Bahrain.
“Every time you put restrictions in place it causes issues and it doesn’t make sense to invite investors to Bahrain, only to watch them run away.”
laala@gdn.com.bh
&uuid=(email))