Dubai: Bahrain's parliament has approved the doubling of value-added tax to 10 per cent, a member of parliament said, a reform that is part of plans to fix the Gulf state's finances.
The Gulf’s smallest economy is seeking ways to cut spending and bring its budget back into balance by 2024. It is not clear when the higher VAT rate will be implemented.
Saudi Arabia tripled its VAT rate to 15 per cent last year to bolster state revenue when oil prices slumped. The UAE and Oman imposed a 5 per cent VAT under a common 2018 framework by the GCC. Kuwait and Qatar have yet to implement the tax.
Parliament recognised the measure was "a critical pillar of the kingdom’s fiscal balance programme", Ahmed Al Salloom, member of parliament and chairman of the Financial and Economic Affairs Committee, said in a statement on Wednesday.
The VAT increase, expected to start next year, could contribute receipts of about 3 per cent of gross domestic product in the next few years, up from about 1.7 per cent this year, ratings agency S&P Global Ratings has estimated.
Bahrain's public debt climbed to 133 per cent of gross domestic product last year from 102 per cent in 2019, the International Monetary Fund has said.
"The successful approval of the VAT increase by parliament is a critical milestone within our economic recovery plans and our aim of achieving a balanced budget by 2024," the ministry of finance said.