Double VAT bill to be referred to Parliament soon

THE government will reportedly refer the draft law on amending the Value Added Tax (VAT) to the legislative branch within the coming days.

The tax, which was doubled from five per cent to 10pc, is one of the initiatives outlined by the government to boost non-oil revenues under the Fiscal Balance Programme.

The government has already approved the draft law which will come into effect on January 1, once it clears the parliamentary hurdles.

The 10pc VAT will not apply to now-exempted food commodities, including foodstuff, as well as more than 1,800 government services.

The Finance and National Economy Ministry said the novel corononavirus (Covid-19) and the drop of oil and gas prices in global markets have pushed Bahrain to adopt a string of initiatives aimed at slashing government expenditure and increasing non-oil revenues.

A report seen by our sister paper Akhbar Al Khaleej outlines key initiatives aimed to gradually cutting government spending to reach 20pc of the Gross Domestic Product by 2024.

According to it, the government will improve efficiency of the budget allocated for projects, optimise spending and ensure fairer direct subsidies to benefit eligible citizens.

Government-owned companies will increase their annual contributions, starting in 2023, and an efficient mechanism will be adopted to periodically review and readjust the prices of commodities and services delivered by companies in line with market trends.

The report expected the overall deficit to gradually decline from 2021 until it reaches a fiscal balance by 2024.

The fiscal balance initiatives contributed to reducing the public budget deficit, with the deficit ratio of GDP reaching 6.3pc and 4.7pc in 2018 and 2019, respectively, but the deficit then jumped to 12.8pc in 2020.

The public debt-to-GDP ratio continues to increase, reaching 87.5pc in 2018 to 93.3pc in 2019.

The pandemic which marred the domestic and global economy in 2020, led the public debt-to-GDP ratio to skyrocket to 114.5pc by the end of last year.

Achieving the stability of the public debt-to-GDP represents one of the most important objectives of the current fiscal balance programme.

All efforts will be harnesses to reduce the ratio gradually, starting from next year.

Source: https://www.gdnonline.com/Details/992575/Double-VAT-bill-to-be-referred-to-Parliament-soon