Business Owners Denounce Bahrain Tax On Foreign Workers

Thousands of business-owners in Bahrain have signed a petition against the government's reintroduction of a tax on foreign workers.

SANABIS, BAHRAIN (SEPTEMBER 9, 2013)(REUTERS) - Bahraini companies have criticised a move by the government to reintroduce a fee on foreign workers, saying the levy will lead to increased hardship among local businesses.

Manama announced last month that the Labour Market Regulatory Authority(LMRA) would start collecting a 10 dinar fee (26.5 USD) per worker, per month, directly from employers.The LMRA's Ausamah A. al-Absi said the fee had been brought in as a result of current market conditions.

"The reintroduction of the levy came after a review of the economy and its performance and the increase in demand for foreign workers," he said.

The fee was first introduced in July 2008, but was suspended three years later in a bid to help companies affected by the political unrest in the country and the global economic crisis.

Al-Absi said now that the economy appeared to be improving, it was the right time to reintroduce the levy.

"The continual increase in applications for foreign workers shows the economy is on the right path, and from this perspective, it is an important factor that we need to look at. Regarding the performance of the economy, I think the expected growth of small businesses is the main factor behind this levy," he said.

Bahrain, a country of 1.3 million people, has based its economic strategy on becoming a regional financial hub as it lacks much of the petrodollar wealth of its Arab neighbours. But political unrest starting in 2011, in which the government has faced mainly Shi'ite-led pro-democracy protests, has hit the economy hard.

But Bahrain's economic growth accelerated strongly in the first quarter of 2013, helped by a revival of oil output, according to official data released in June.

Al-Absi said he didn't anticipate that the levy would have a damaging effect on the country's economic recovery.

"We don't expect the levy to have a major impact for at least a year following its introduction. Also, we will be constantly reviewing it, every three months, but we don't expect there to be any changes," he said.

Like much of the Gulf region, Bahrain has a large community of migrant workers from the Indian subcontinent, who provide cheap labour to help with the rapid construction of the country.

But Bahrain has been reforming its labour market in recent years to drive up the cost of foreign labour, mostly unskilled workers from Asia, and improve the competitiveness of its own population.

Three years ago, the government allowed workers to change jobs without the consent of their employers, hoping that by increasing foreign workers' rights it would improve their ability to bargain for higher wages and thus attract more local workers to the jobs.

The move prompted complaints from business leaders about higher wage demands - and they feel they're being unfairly targeted again now.

"Regarding the ten dinars which we have been told about, we think it is not the right time, in the light of the economic crisis the country is experiencing and also the political crisis. So, the timing is not appropriate at all," said Hisham Mattar, who owns the Lion Construction company.

Mattar, who employs over 50 people of different nationalities, said many businesses were struggling to stay afloat as political unrest in the country continues and in the wake of the global financial crisis.

If business owners are unable or unwilling to pay, they are taken to court and their business transactions are frozen, Mattar said.

"Business owners are being treated like criminals by the courts and public prosecution because of their failure to pay the ten dinars," he said.

Mattar is spearheading a campaign to try and have the levy frozen.

"We have collected 5,000 signatures for our petition and have presented it to His Highness the prime minister. The signatures are still coming in. A separate list has been drawn up by several business owners who are suffering financially because of the current problems we have just mentioned, and also because of the problems that exist in the markets, which have so far not been resolved," he said.

The government says the levy on foreign workers will be used to train Bahrainis for work, in a bid to decrease the country's reliance on foreign labour.