Big business delays progress of democracy in Bahrain

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Firm vows to bear 1pc cut in salary
The Bahrain National Holding Company announced yesterday that it is to bear the costs of the government’s one per cent unemployment benefit tax for its nearly 200-strong workforce.

Officials yesterday said the firm had already begun making deductions from staff salaries last month but that following a thorough management study, it was decided to ease the burden on employees. This includes employees of both of its fully owned subsidiaries, Bahrain National Insurance and Bahrain National Life.
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This is a message to those companies whose officers are deluded by their “magnanimous gesture” of bearing the 1% unemployment benefits contribution on behalf of their employees: You are not doing Bahrain any favours, what you are doing is simply delaying the country’s progress in the long term.

We’ve all heard that idiom which says that the only two constants in life are death and taxation. Taxation has been hidden in our Gulf countries and has been named anything but its real name because of the prevailing thinking is that taxation is bad and we must promote our countries as tax havens. This is not a good thing. Whether we like it or not, we will have to pay income and corporate taxation sooner or later, and the sooner we get used to paying taxes, the better we will be.

Why? Because our lethargic and submissive culture will gradually change. When one pays their hard-earned cash into the government’s coffers, that person will ultimately demand to know how that money is being spent with all that simple demand entails: ultimately, a proper political representation and a proper voice in how our governments are run.

What these “do gooder” companies are doing is nothing but robbing us of that proper representation chance and delaying its onset by several years if not decades.

They should most certainly re-examine their position and think of the long term competitiveness and political stability of the country rather than providing this silly and unneeded momentary band-aid which will do nothing but prolong a much needed healing process.

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17 Comments
  • Johnster
    15 August 2007

    Actually, I disagree with you Mahmood. One should be taxed according to what one spends — so if you want a Porsche Cayenne and a Rolex, then pay the VAT.

    VAT you generally cannot escape from so easily as income tax. And it affects everyone whether they are visitors from the causeway or permanent residents.

    My biggest fear however is that tax would just grow the public sector which is already bloated and highly inefficient.

    Lastly, there is another slogan ‘NO TAXATION WITHOUT REPRESENTATION” — so when can I start voting?

  • Anon 4- ever
    15 August 2007

    Yes Mahmood you are making a good point here, however, i think we (the people of bahrain) still refuse to pay this “tax” for many reasons, im sure you know this i just want to remind you.

    The government has a all this money coming from the oil and they still want us to pay tax!
    1 barrel of will cost (that much amount-for 1 year for example) but hey it is increasing every now and then, where is this extra money pouring into the state’s treasury? why dont they use this, im sure it will be more than enough for all those unemployed citizens.

    I appreciate what those companies are doing!

  • mahmood
    15 August 2007

    Johnster, that’s another way of looking at the problem and I agree with you as far as the VAT is concerned, it will be selective as you imply. However, this will never be accepted because the culture of “being carried” is quite prevalent, as you can see from the comment following yours.

    Anon4Ever, that is a different issue. You are talking about corruption which – I agree with you – should be eradicated as it is one of the main factors delaying us going forward. But paying this simple 1% Unemployment Benefit tax is not going to solve it, in fact it is destined for a totally different thing in that it is there to help regular people who have been unfortunate in being unemployed and only for a short period of time. It is money from me and you to help our fellow Bahrainis. That’s all there is to it. The added benefit is that this tax will allow us to start thinking of taxation and work toward getting our rights. There is nothing like tapping into your wallet to make you sit up and take notice.

  • Capt. Arab
    15 August 2007

    To put it in another way, I personally believe that the only people who actually benefit from Bahrain being a tax free country are the expats (nothing against them). However, at the same time I strongly believe that if I want or expect a solid and efficient service from my government, it will never be free.. Everything has a price. That’s where accountability, transparency and efficiency makes a difference. For as long as we have a government where we expect it to bail us out everytime, we will never go forward, ofcourse Bahrain has always had it’s place in the region in terms of education, social structure, etc.. But at the same time, neighbouring countries have already passed us by.. All we can see is their distant tracks. It’s time we buckled up, and got real. So will those companies be willing to pick up the tab of percentage raise of GOSI when the 21% gets implemented in 2009? I didn’t think so… What happens when a government has no means to sustain it’s people? If we remain the way we are, we shouldn’t complain about the half-assed service we always get.. An elected parliament can never ever change that attitude, unless we contribute to the service by means of taxation. When you pay, you can demand.. Otherwise zip-it, and enjoy the scraps !!!

  • Johnster
    15 August 2007

    Hello Capt Arab

    Western expats do not benefit from this being a tax free country on the income earnt here because companies (such as the one I work for) pay you what you would get net in the UK anyway. So if in the UK I earn say GBP5000 gross, which is GBP3000 net, then here I would earn GBP3000. The days of the Gulf being a hardship posting are long gone (sadly).

    The only time it benefits living outside the UK is on investments you have abroad, then you don’t have to pay UK tax. As for Americans, the IRS makes them pay tax even when tey are expats — hence the relatively low number of American expats (apart from ony 11% of US citizens possessing passports)

    Johnster

  • Merlin
    15 August 2007

    Political theory always classified countries of the GCC under a unique concept of the “rentier states”. Rentier as in the governments or “the state” survives independently of its people off of the rent earned from the sale of natural energy.

    The GCC states are unique in a sense that they do not have the same ability of other countries in the world to hold their governments accountable or make demands. They take what they are given and are subordinates to their regimes.

    Taxation would change that and I welcome it from that perspective, as well as the transparency it could bring.

    Similarly, it is taxation that on many occassions of history brought about progress, development or even a resolution of deadlock. Think of the Thatcher government’s attempts to impose the poll tax.

  • Capt. Arab
    15 August 2007

    Hi Johnster
    I totally agree with you on what you elaborated on, you must also agree that expats still save on the price of goods, petrol, housing, schooling and other benefits that would normally pay for (plus taxes) on the net salary that you mentioned. On the contrary, there are still firms that maintain the decent packages that expats are used to, and believe me that there is a need for expat expertise in various areas. I am in favor of paying taxes, if it means that I will get a better service within standards, rather than a half-assed service by some government employee who is disgruntled and could not care less, and has this belief that his job is for life. This could be a wake up call for many people.

  • jayjerome
    15 August 2007

    When one pays their hard-earned cash into the government’s coffers, that person will ultimately demand to know how that money is being spent with all that simple demand entails: ultimately, a proper political representation and a proper voice in how our governments are run.

    Ah, if that was only true. The history of governments (even liberal ones) is that they hide, twist, and distort the money trails — and what goes in one pocket (the government’s) always comes out diminished.

    VATs are OK, if they’re applied only to luxury goods; if they are a sales tax on all goods, the poor end up paying a disproportionate share of the tax burden.

  • Anon 4- ever
    16 August 2007

    Exactly Mahmood thats what i meant corupption! we never know where this 1% will go! to our fellow unemployed? maybe a little bit of it, i mean its a lot of money from each employed person. trust me i will be more than happy to start goin forward and in our “democracy” but i am serious i cant trust these people anymore when it comes to money (when it comes to anything actually).

    so if its goin from the company’s pocket then its fine :mrgreen: , otherwise noooooo !

  • Capt. Arab
    16 August 2007

    I’m still waiting to see the guidelines to the 1% unemployment benefit, Does anybody know if they have been issued, or is the government just utilizing the time to buildup the cash reserve?

  • Jimmy
    16 August 2007

    Taxes = Transparency

    That’s why we will never have taxes in Bahrain, despite what we think.

  • mahmood
    16 August 2007

    Anon4Ever:

    trust me i will be more than happy to start goin forward and in our “democracy” but i am serious i cant trust these people anymore when it comes to money (when it comes to anything actually).

    We’ve got to start thinking and implimenting in a nonlinear fashion. We cannot continue to say that we must fix this and then fix that and onward. And you can’t always start with fixing the biggest problem, because that may – in fact will – have quite a number of prerequisites.

    It is far better – in my opinion – to multitask and attack problems in a nonlinear fashion. This way things will get fixed and we will go forward with our lives and country, rather than continue to be rather pessimistic and have a very very dark vision.

  • mahmood
    16 August 2007

    Capt Arab, here’s the full text of the Law:

    http://www.legalaffairs.gov.bh/htm/L7806.htm

  • Capt. Arab
    16 August 2007

    Thanks Mahmood.

  • doncox
    16 August 2007

    “VATs are OK, if they’re applied only to luxury goods; if they are a sales tax on all goods, the poor end up paying a disproportionate share of the tax burden.”____VAT can be applied at a higher rate for luxury goods and at zero rate for items such as food or children’s clothes which are a big part of the budget for poor families. I think it is in general better to tax spending than income.

  • Abdulkarim
    16 August 2007

    I think the 1% unemployment tax is a great idea. The government should be applauded for coming up with such a noble scheme. They had more generous unemployment benefits in the West for many years but Bahrain is the first in the Arab world to do it and that is just great.

    I however, think the unemployment fund should all be financed by taxation and not from the oil revenue. Yes taxes are unpopular but they have lots of benefits too. After all they are a small price to pay for living in an orderly society.

    The oil money does not belong to people alive now only. It belongs to future generations too. We may have the power to spend it but I do not think we have the moral right to deplete this perishable asset (and so far our only real valuable asset) on ourselves alone.

    In my opinion the oil revenues should be directed more towards long term investments and less on subsidies and social benefits.

    Look at Norway. It is flush with oil and gas revenues. It is after all the third largest oil exporter in the world! Yet in spite of that, it is also one of the most heavily taxed countries in Europe with overall taxes reaching to 35% and even more!

    The Norwegians could easily cut their taxes and rely more on oil revenues. No they would not have any of that thank you. Instead they opted to keep most of their oil earnings for the future in what they call a petroleum fund which now has a value of about US$ 320 billion. Yes US$ 320 billion and rising fast. Now that is sound economics.

    Here it is rather different. People seem to want to spend the oil bonanza as if there is no tomorrow. Look at the MPs. They are pressuring the government to have a full pension for a few years “work”!

    As for most other people well their reaction to a meagre 1% tax with a noble cause has been negative. I do not have statistics to back my claim but judging from the comments I read in the papers and conversations I had, it appears that most people wanted the unemployed to go to the wall or else it is the government who should bail them out. No no they do not want to pay taxes and would come with all sorts of execuses as to why they should not pay. Rather they want to spend the future now. Well that does not seem to me to be sound economics!

  • Min?
    19 August 2007

    that person will ultimately demand to know how that money is being spent with all that simple demand entails

    Oh yeah? And how well did that work with reference to the GOSI money? Like we will get the truth ….

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