Bahrain's government cannot increase Value-Added Tax (VAT) without legislative approval, a top MP revealed yesterday.

Parliament financial and economic affairs committee chairman Ahmed Al Salloom said legal consultations revealed that the government faces legislative restrictions stated in the law associated with the original move to introduce the levy in October 2018.

VAT of five per cent was introduced in Bahrain on January 1, 2019 with 94 commodities being exempt.

Mr Al Salloom comforted residents and citizens that Bahrain wouldn’t follow Saudi Arabia which increased VAT from 5pc to 15pc from July.

“The legislative mechanisms of Bahrain and Saudi Arabia are completely different,” said Mr Al Salloom, who is also board member of the Bahrain Chamber for Commerce and Industry.

“For any amendment to the introduction and implementation of a law requires legislative consent through law from Parliament and the Shura Council.”

Meanwhile, Bahrain Centre for Strategic, International and Energy Studies (Derasat) research director Omar Al Ubaydli said the VAT increase in Saudi will not affect commodities and services provided to Bahrain.

“It will not; VAT is only applied to goods that are consumed domestically, not exported,” he said.

“It will be a challenge to cope with Saudi austerity measures, but this has happened before, such as in 2015 and earlier; these ups and downs are a normal aspect of the business cycle.

“Bahrain’s government is surely considering all options. Changes to taxes require parliamentary approval, which ensures that any proposals will be vetted and discussed by both upper and lower houses.”

Saudi also announced that it was going to stop, from June 1, the 1,000 Riyal (BD100) monthly social allowance for government employees introduced two years ago after fuel prices were increased.

“The termination of the 1,000 Riyals is unlikely to have a significant effect (on Bahrain tourism) since the cost of visiting Bahrain is low because they can enter by car and go back on the same day,” said Mr Al Ubaydli.

“But tourism all over the world will be affected negatively by the weakness in the global economy.”

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