Bahrain is planning to double the value-added tax (VAT) to 10% in a bid to offset the budget deficits as well as incentivize the country's profit as the economy starts to shake off the covid hit.
This hike comes in the Kingdom's efforts to 'bring its budget back into balance by 2024 without undermining a fragile recovery', Bloomberg reported.
Even before the pandemic shock, the smallest Gulf economy was wailing under financial setbacks despite the Saudi $10 billion bailout package in 2018. Back then, the Kingdom has taken a handful of reforming measures.
The economy of Bahrain is showing signs of recovery from the double whammy of Covid-19 and a fall in oil prices.
The International Monetary Fund (IMF) expects Bahrain’s budget deficit to shrink by half this year and recommended 'Urgent Fiscal Adjustment' in July according to Bloomberg.
Bahrain now is the fourth GCC country that has now a VAT system, following the UAE, Saudi Arabia and Oman. The 5% VAT was first introduced in 2019 and there are over 18,900 taxpayers in the Kingdom according to statistics cited by the News of Bahrain.
