News that Bahrain is reviewing a draft policy to introduce a three-percent basic rate of income tax should be welcomed. The Bahraini move, would be merely a starting point  ripe for further reform if the situation demanded. In effect it is an attempt at partial taxation, because the revenue generated would be ring-fenced to finance the introduction of an unemployment benefit system along the lines of the British one. Although the move would be a step in the right direction, it would not contribute significantly to the Bahraini budget.
Even then the three percent is really two percent  employers would contribute one percent, the employee one percent, and the government one percent. In the case of public sector workers (read civil servants and bureaucrats) the state would contribute two percent. This would be the only two-tier partially subsidized tax system in the world. But Bahraini Labor and Social Affairs Minister Majeed Al-Alawi is keen to point that this initiative is not a handout. ArabNews
So here’s why we have a parliamnent and a democratic movement in Bahrain. I’ve said before that one of the major reasons the government agreeing to democratise the country is so that parliament and government can introduce taxation, after all, we don’t have natural resources to speak of when compared to our poorest neighbour.
But introducing income tax that is essentially flawed by discriminating against the private sector is most definitely not the way to go. This will create more problems for us small businessmen as well as for large corporations. More important to me is the fact that if anyone pays tax, then he should have direct involvement and say in the direction and policies of the government. If I pay the government taxes, then I should have a direct access into their books and have the full right to see how the tax is being applied, rather than go into the deep pockets of the fat cats.
