Government Rejects Proposal to Eliminate 1% Salary Deduction

TDT | Manama

The Daily Tribune - www.newsofbahrain.com

Email: ashen@newsobahrain.com

The government has officially rejected a parliamentary proposal to eliminate the 1% salary deduction contributing to the unemployment insurance fund. The government's response outlines several key reservations regarding the proposed replacement of this deduction with revenue from Value Added Tax (VAT).

The government's rejection centers on four main points:

1. Impact on State Finances: The government argues that VAT revenue, while significant, is insufficient to fully compensate for the loss of the 1% salary deduction. Allocating a substantial portion of VAT revenue to the unemployment insurance fund would create a shortfall in funding for vital development and economic projects.

2. Increased Indirect Taxation: Redirecting VAT revenue to cover the unemployment insurance fund would lead to a de facto increase in indirect taxation on citizens. This, the government warns, would negatively impact purchasing power, increasing the cost of living and potentially sparking public discontent.

3. Ensuring the Sustainability of the Unemployment Insurance Fund: While acknowledging the importance of maintaining the unemployment insurance fund's sustainability, the government believes replacing the deduction with VAT revenue is not the optimal solution. Instead, it proposes exploring alternative solutions, such as reviewing the current deduction system or seeking additional funding sources, to support the fund without impacting general revenue or burdening citizens with additional taxes.

4. Need for More Comprehensive Financial Proposals: The government urged the legislature to consider more comprehensive proposals that address the financial situation of the unemployment insurance fund holistically. This should involve a balanced approach to protecting citizens' income while ensuring the fund's long-term viability. The government suggests that reforms should include a comprehensive review of the pension and tax systems to achieve social and financial justice.