BAHRAIN needs to tackle the challenge of economic recovery and achieving fiscal balance with the same spirit with which it has tackled the coronavirus pandemic.
Finance and National Economy Minister Shaikh Salman bin Khalifa Al Khalifa highlighted Bahrain’s success in combating the pandemic, which was possible through solidarity between the people and their working together as one team.
He said priority was given to national and citizens’ interests, adding that all resources were harnessed to support efforts to mitigate the pandemic.
During a remote meeting with editors-in-chief of local newspapers, he stressed that addressing the issue of economic recovery and achieving fiscal balance requires that Bahrain adopts the same approach and have the same spirit of responsibility that prevailed while combating the Covid-19 pandemic.
He said that the government has chosen to raise VAT to 10 per cent and redirect subsidies to those who deserve them the most. The decision to raise VAT from the beginning of next year is aimed at achieving fiscal balance in 2024, instead of 2022, the minister said.
This is the best option which would have the least impact on citizens, particularly low-income segments.
He stressed that 94 basic food commodities would continue to be exempted from VAT, as well as 1,400 government services, which covers 90 per cent of the expenses of limited-income citizens.
Other options include reducing wages and allowances or raising VAT to 15pc without touching the wages or social welfare given to nationals.
In reply to a question from Akhbar Al Khaleej Editor-in-Chief Anwar Abdulrahman, the minister said that Bahrain has proper mechanisms to monitor inflation and check prices in the local market to protect consumers and ensure that citizens are least affected.
Mr Abdulrahman then asked about the impact of the increase in VAT on foreign investments. The minister said that “safe investment environments can only be based on financial stability, and our experience show that the flow of investments was not affected when VAT was first introduced.
“It can be impacted by income tax and corporate taxes but not the limited consumer taxes.”
Akhbar Al Khaleej learnt that during a joint meeting between the government, MPs and Shura Council members, a number of MPs suggested imposing taxes on the profits of companies and on expatriates’ remittances or reducing the number of ministries and curtailing their expenses.
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