Bahrain Mirror: Consumer spending will dip and price inflation will rise in the immediate aftermath of the introduction of value added taxation (VAT) in Bahrain, according to the head of consultancy Ernst & Young's VAT advisory services.

Speaking to Bahrain-based Gulf Daily News, EY's top regional VAT consultant David Stevens said the period before and after the implementation in 2019 would mimic how VAT affected economies in the UAE and Saudi Arabia.

Decline in spending post implementation will come about as a result of increases in prices, according to Stevens.

Saudi Arabia and the UAE were the first two countries to introduce VAT among Gulf countries on January 1, 2018 at a rate of 5%.

However, Bahrain and Oman opted to delay introduction to 2019, while Kuwait is reportedly mulling implementation in 2021.

"We hope all four will make public announcements as to their intended start dates after Eid Al Adha, so businesses can act with some certainty in their time consuming and essential readiness preparations," a news website reported Stevens saying.

https://www.albawaba.com/business/bahrain-implement-vat-2019-1177292

For his part, another tax expert said Bahrain is likely to implement first followed by Oman and Kuwait. He added that as per latest reports "Bahrain should implement VAT by January 1, 2019, though initial plan was to implement from October 1, 2018."

Bahrain will introduce VAT at the same rate, which will allow any impact on the economy to be "modest and short-term in nature," said Stevens.

Sectors that VAT will be levied on are yet to be confirmed, he added, however it's grow Bahrain's revenues by up to 2% of the country's GDP.

According to Ernst & Young, 5% VAT is expected to produce revenues of over $25 billion per annum for the six GCC countries.

Stevens noted that there is definitely room for Bahrain, Kuwait and Oman to introduce a different VAT law than implemented by either UAE or Saudi Arabia so local dynamics are taken care.

Arabic Version