Bahrain Noted for Outstanding Fiscal Freedom

Every year the Heritage Foundation puts out its rankings of economic freedom in the world. This year the USA came in sixth. Of the Muslim countries, Bahrain scored best, coming at #16, with an economy ranked overall at 75% free. Bahrain got honorable 80% scores on trade freedom, business freedom, and government size, 74% on labor freedom, and a fair 60% on investment freedom and property rights, although it lagged in freedom from corruption, getting only 50%, an embarrassment for a country that professes Islam. Where it really shines, however, is in fiscal freedom, blowing the competition away with a 99.9% rating! (The U.S. only scores 67.5% and even top-rated Hong Kong only gets 93.4% on this parameter.) Taxes are less than 3% of GDP.

The reason’s for Bahrain’s outstanding ranking start with the fact that it has no personal income tax (although there is a 1% tax on “the salaries of Bahraini nationals working for companies with more than 50 employees as a way to fund job training.” Few companies (mainly oil companies generating domestic profits). There is “a small stamp duty is collected on property transfers” and since last July, “employers must pay a new tax for each expatriate employee.”

So Bahrain provides a fiscal model for the rest of the Muslim world. Now, if they can just do something about that corruption.

Imad-ad-Dean Ahmad, Ph.D.
Minaret of Freedom Institute

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