Parliamentary proposal to tax foreign remittances could cripple Bahrain's financial sector: CBB 

TDT | Manama                                                        

The Daily Tribune – www.newsofbahrain.com

The Central Bank of Bahrain (CBB) is sounding the alarm over a new parliamentary proposal that wants to tax money sent abroad by foreigners. The CBB warns this “Foreign Financial Transfers Tax” could cripple the Kingdom’s financial sector and send its attractiveness as a business hub plummeting.

The proposed tax, a hefty two percent on all outbound cash transfers, has supporters who see it as a golden goose for diversifying Bahrain’s oil-dependent economy.

They argue it will keep millions circulating within the country, fueling growth. But the CBB paints a different picture. It fears the tax will drive banks and financial institutions fleeing, taking their business and investment dollars with them.

Bahrain’s competitive edge against its Gulf neighbours and other top expat destinations, all tax-free for foreign transfers, would evaporate.

The ripple effects could be far-reaching, squeezing employers forced to shoulder the tax burden and ultimately impacting citizens and businesses alike. Foreign talent, lured by Bahrain’s open economy, might reconsider with a new financial levy hanging over their heads.

The CBB also warns of unintended consequences: a surge in shady, unofficial channels for sending money out of the country, bypassing the official system and undermining its transparency.

This proposed tax is not the first rodeo. Similar attempts earlier had met with strong opposition from the government, the Ministry of Finance, and even the Bahrain Chamber of Commerce and Industry.

All see the potential harm far outweighing any short-term revenue gains. The Council of Representatives, however, seems determined to see this through. Despite the CBB’s dire warnings and widespread opposition, they’re set to discuss the proposal soon.

The question remains: Will Bahrain risk its hard-earned reputation as a financial hub with this controversial tax, or will they listen to the CBB’s pleas and steer clear of a potential economic calamity? The answer will have consequences for not just Bahrain’s bank accounts, but the future of its entire economy.