The government of Bahrain has officially rejected a parliamentary proposal to eliminate the 1% salary deduction contributing to the unemployment insurance fund. The government’s response, outlined in a report, raises several reservations regarding the proposed replacement of this deduction with revenue from Value Added Tax (VAT). The rejection is based on four key points, including the impact on state finances, increased indirect taxation, ensuring the sustainability of the unemployment insurance fund, and the need for more comprehensive financial proposals.
The government argues that while VAT revenue is significant, it is not enough to fully compensate for the loss of the 1% salary deduction. Allocating a substantial portion of VAT revenue to the unemployment insurance fund could create a shortfall in funding for important development and economic projects. This could have a negative impact on the overall financial health of the state.
Redirecting VAT revenue to cover the unemployment insurance fund would effectively increase indirect taxation on citizens. This could lead to a decrease in purchasing power, higher cost of living, and potential public discontent. The government warns that such a move could have serious repercussions on the economy and the welfare of the population.
While the government acknowledges the importance of maintaining the sustainability of the unemployment insurance fund, it believes that replacing the deduction with VAT revenue is not the best solution. Instead, it proposes exploring alternative options, such as reviewing the current deduction system or finding additional funding sources. This would support the fund without burdening citizens with extra taxes or impacting general revenue.
The government is urging the legislature to consider more comprehensive proposals that address the financial situation of the unemployment insurance fund in a holistic manner. This approach should focus on protecting citizens’ income while ensuring the long-term viability of the fund. The government suggests reforms should include a thorough review of the pension and tax systems to achieve both social and financial justice for all citizens.
In conclusion, the government’s rejection of the proposal to eliminate the 1% salary deduction for the unemployment insurance fund is based on valid concerns about the impact on state finances, increased indirect taxation, and the need for more comprehensive financial proposals. By exploring alternative solutions and taking a balanced approach to financial reforms, the government aims to protect citizens’ income while ensuring the sustainability of the unemployment insurance fund in the long run. It is crucial for all stakeholders to work together to find solutions that benefit the economy and the welfare of the population as a whole.
