Bahrain Revenues to Rise by 1.8% as VAT Increases to 10%: Moody's

2021-10-05 - 6:58 am

Bahrain Mirror: Moody's Agency predicts that Bahrain will be able to increase the Value Added Tax from 5% to 10% at the beginning of next January, to increase state revenues by about 1.8% of GDP.

The agency said in a recent report that this move partly addresses the government's major debt relief challenge. 

"A restart of Bahrain's Fiscal Balance Program (FBP), including an increase in the VAT rate, could improve the trajectory of the country's public finances," Fitch Ratings said.

"We believe that it would be necessary to advance with other fiscal measures, in addition to the VAT increase, to balance the budget deficit, based on current assumptions about the price of oil."

Fitch estimates that such a VAT hike could generate an additional 1.5-2% of GDP in revenue.

The Bahraini Cabinet approved a draft law amending the value-added tax, and increasing it from the current 5% to 10%, starting from January 2022.

The Cabinet referred the bill to the Parliament for approval.

The Government of Bahrain said in an earlier statement at the same time that the annual real GDP growth reached 5.7% in the second quarter of 2021. Bahrain began applying value added on January 1, 2019 at the basic rate of 5% on all goods and services, with the exception of some goods and services that are subject to value added at 0% or those exempted from value added as specified in the value-added law and its executive regulations.

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