MANAMA: With the GCC is working on the value-added tax (TAX) with a tentative timeframe of implementation by 2018, an economist sees no tall list of the taxes in Bahrain in the offing except VAT.
“The GCC bloc is committed to this tax by 2018 about 5% with some exemptions such as food items etc., which is a global norm, the VAT will be relatively a painless but the important aspect of such move will be creating a link to the non-oil economy,” Dr. Jarmo Kotilaine, EDB’s Chief Economist, told the roundtable with the local media on Wednesday explained.
The Government Bahrain is working on fiscal consolidation with a tentative target of streamlining the deficit of the national budget in three years.
“There will be very light impact of VAT as when you talk about consolidation of the economy, indirect taxation remains an option and I do not see a long list of taxes very soon,” Dr Jarmo explained.
The Kingdom’s economy remains resilient so far this year with non-oil growth reaching 3.6% in second quarter of 2016, according to the official statistics.
Bahrain’s non-oil sector grew by 3.6% in the second quarter of 2016, a marked acceleration from 2.7% in the first three months of the year, according to the Bahrain Economic Quarterly released by the Economic Development Board (EDB).
“The fastest growing individual sector during the second quarter of 2016 was social and personal services, a category dominated by private education and health care. It has been consistently one of the most dynamic sectors of the economy in recent years and grew by an annual 9.9% in Q2,” the Chief Economist explained.
The sector, which accounts for more than 80% of GDP, has demonstrated continued resilience in the face of lower oil prices and considerable global economic volatility. This momentum has been seen across a number of sectors and is strongly underpinned by the ongoing implementation of a $32billion pipeline of strategically significant infrastructure projects in the Kingdom. For instance, the total cumulative value of the active projects financed by the GCC Development Fund has reached nearly USD4billiion, more than tripling in less than a year. Also, a number of real estate, transportation, and manufacturing projects, such as ALBA Line 6, are progressing well.
The Financial Services sector has continued to perform well with a 4.0% pace of real growth in Q2. Likewise, the Manufacturing sector expanded by 3.3% in Q2 in a near-tripling of the pace seen in Q1.
Growth across the private sector was also supported by growth in bank credit, with the average annual rate of credit growth during the first half of the year reaching 7.2%, and the cost of credit remaining stable, declining slightly in the course of the first half of the year.
“The resilience the economy has demonstrated reflects the strength and maturity of the non-oil private sector in Bahrain – we are very pleased to see continued growth even in the face of considerable headwinds,” Khalid Al Rumaihi, Chief Executive of the EDB, said, while commenting on the findings of the BEQ report.
“In the coming years we expect the GCC economies to move from a model of extensive growth, driven by increased people, land and capital, to productivity-led growth. The large infrastructure investments we are currently seeing and the strength of the non-oil private sector will be important in creating opportunities for investors and ensuring that Bahrain continues to thrive.”
