Commentary by Hasan Alhasan – 1 November 2011
The decades long adage of “no representation without taxation” that seemed to underpin the way governments have interacted with their citizens in the Gulf region soon may no longer be valid in the tiny island kingdom of Bahrain. In August, the government announced it was studying the highly unpopular option of introducing a corporate tax on companies, a valued-added tax on products and a cut in public subsidizations of consumer goods to cover the growing budget deficit. The country’s Crown Prince Shaikh Salman Al-Khalifa – a modernizing figure within the country’s ruling family – is intent on decreasing Bahrain’s economic dependence on oil and thus on Saudi Arabia. It is estimated that in 2010 oil revenues coming in from the shared Saudi oil field of Abu Safah as subsidy represented up to 67% of Bahrain’s budget revenue.
Bahrain has been in the spotlight as opposition forces staged massive demonstrations in the kingdom’s capital Manama between the months of February and March following events in Tunisia and Egypt. However, the entry of Saudi troops on March 14th was followed by a large-scale crackdown by local security forces, and efforts towards dialogue and political reconciliation ended in vain. Today, Bahraini society remains very much divided between the mainly Shiite opposition and Sunni loyalists.
The eventual introduction of taxation, increasingly seen as inevitable, will undoubtedly pave the way for greater political accountability by the Bahraini government. Currently, the state imposes a minimal set of social insurance fees on corporate entities and has no personal income taxation scheme. Citizens who have long enjoyed access to public housing, free education and virtually free healthcare among a list of other benefits will start to feel the impact of the country’s generous welfare system on their own personal incomes even as an indirect tax scheme is introduced. As taxes become more of a reality, citizens of various political convictions could very well demand having a bigger say in how their money is spent. In the long run, the hope is for this to eventually translate to a considerable political consensus on demands for greater legislative and oversight powers to the elected chamber of parliament, further freedom of press and an increased participation of civil society in policy-making in spite of the Sunni-Shiite gap.
However, in the wake of recent unrest, conservative forces within government have successfully bargained for political support from the merchant class-dominated Bahrain Chamber of Commerce and Industry (BCCI) in exchange for suspending economic and labor market reforms previously initiated by the Crown Prince. Very recently, the BCCI expressed its support for the King’s controversial amendments to the country’s 2002 trade unions law, hitherto seen as the most liberal in the Gulf region. The amendments aim to weaken the opposition’s iron fist control over trade unions and federations as well as to punish trade union representatives who were actively involved in organizing strikes directed against the government. The Crown Prince’s continued marginalization and the backpedaling on much of his reforms by conservative groups within government and merchant class representatives certainly render the shift towards a more autonomous, oil-independent economic setting more challenging at least for the time being.
Nonetheless, as international and domestic pressures continue to be exerted on the kingdom’s rulers, the country will have to introduce reforms probably quid pro quo a taxation scheme under the leadership of the Crown Prince, arguably one of the few remaining bridges between the opposition and the ruling elite. In 2002, the country’s ruling elite under the leadership of the King proved itself willing to introduce reform by drafting a constitution, reinstating parliament, legalizing trade unions and allowing for a greater freedom of press. Given a favorable balance of power within the ruling family, there is little reason to believe that the Bahraini leadership would be fundamentally opposed to reform today. Political reform obtained as a result of greater citizen participation in the economy through a taxation scheme may very well be Bahrain’s alternative, more gradual and probably less polarizing path to further democracy.
Hasan Tariq Alhasan is currently pursuing a Master in International Political Economy at the London School of Economics, UK. He has obtained an undergraduate degree in Political Science (Middle East concentration) from the Institut d’Etudes Politiques (Sciences Po) in Paris, France. He has previously written opinion pieces on Bahrain for La Tribune and The National. Research interests include GCC-Iran relations, GCC labor markets and the transformation of public bureaucracy in the GCC.