Why taxation is a good idea for Bahrain

Before closing this page let me first explain that the current political system isn’t working with or without taxation, taxation under the current system will only lead to more corruption (e.g. ALBA-ALCOA) and the enrichment of a handful of individuals, but as there is a spectrum of political visions that should put an end to corruption and dictatorship we should also be interested in creating an economic vision that will help us not only in bringing prosperity but prevent the forming of another dictatorship, for that I think taxation is a good idea.

Bahraini author Omar Alshehabi is now preparing his next book about the economics of the rentier state (الدولة الريعية) and how it transformed the society in the gulf region.

 The writer describes a rentier state as a state that generates a substantial amount of its revenue from renting natural resources to foreign entities rather than producing consumable products, such system was adopted by oil rich countries at first but it didn’t stop there, countries that are not rich in resources used political alliances as a source of income.

The nature of pre-oil economies in the gulf relied on trading, monarchs used to take their percentage from the profit merchants made in order to pay for governing duties, that system created a very influential upper class that had a relatively bigger role in decision making.

With the discovery of oil (Bahrain was the first in GCC 1923) and the demise of  pearl trading the monarchs found their new linchpin in oil money, by monopolizing the right to extract oil the merchants class was sidelined and the decision making process became even more exclusive, the general population became majorly employees in “rent maximizing” activities that are ran by the government unopposed thus making the regime the only financially independent entity in Bahrain and removing the role of the elitists families, German sociologist Karl Marx called that state “economic parasitism”.

Hussain Mahdavy an Iranian author tried to inspect the rise of rentier economy and how it shaped the political scene in Iran, he concluded that the rentier economic model encourages the establishment of bureaucracy, since the rent money is paid directly to the government the temptation of creating a rentier class that dominates with its own independent source of income is considerable if not inevitable.

Rentier states won’t rely on taxes as a source of income because if we excluded the resources the government already rent there isn’t much production to tax anyway because industries were marginalized for rent maximizing tasks, the rent revenue compensate for taxes and gives the government the ability to “buy” the consent of the general populace without paying for the unpopular taxes on the long term, for most it will look like the government is giving rather than taking. What we tend to forget is that taxes aren’t a way of financing governments only but also a way of redistribution of wealth, the ability to distribute wealth can easily be translated into political influence and can also shape the society by forming classes, which makes any kind of democratic transition at jeopardy.

Another useful feature of taxes is that it serves as a compass for the society, taxes which benefit the society will be unchallenged while unpopular taxes will be contested by participation every once in a while, the very beginnings of the American revolution was after a campaign that used the slogan “No taxation without participation” a slogan that was used in Ireland and which was later on a part of the English bill of rights (forbid taxes without parliament permission), taxes will ultimately set the course of the economy toward fulfilling the most urgent needs of the society and fully utilize its resources, without it popularity rather than performance is what shapes the political elite.

In the run for presidency in the united state this year republican candidate Mitt Romney refused to disclose more of his tax returns, such PR fail will certainly effect his campaign, now I can only imagine what we would discover if we had taxes in Bahrain, with a very small elite owning big shares of the economy the numbers in taxes of those elite will be astronomical, and I would really love to challenge a lot of our politicians to disclose their tax return (that’s when we have one).

Now what do you think? isn’t that a good idea?