24 June 2007

That pesky 1%

Well, i've avoided writing about the subject for a while now, but as everyone's salary date moves closer, I can hear it being talked about it all over the bank I work in; by the water cooler, in the hallways, in the office etc. And people are not happy - i'm assuming a similar situation is happening in other companies, banks, ministries etc.

So what's the deal here? Well, if you're not aware already, there has been a national program created to deal with unemployment in the country. The unemployed get paid a salary, or lets say subsidy, for a certain period until they are able to secure a job. All well and dandy. Now, the terms of financing this program include taxing all employees in Bahrain 1% from their gross salary. Yes, tax. "But we're a tax free haven" I hear you say? Well, its not being labelled as tax though, is it. It's labelled as "Insurance against Unemployment". And its only 1% anyway, so it shouldn't 'really' be such a big deal.

Of course, with the increasing selling price of oil, and the mentioned profits made from the Formula One event 2 months ago, there must be a lot of extra revenue generated for Bahrain, so you would assume that there would be enough to cover such a program without having to reach into employees' pockets and pull out 1% of their salaries. Obviously, this is wrong, because the country has sooo many expenses, such as the cost of constructing buildings with huge fans (to think that they are supposed to generate power from natural sources like wind, wouldn't it have been more appropriate to use solar panels? Sorry, i'm veering off-topic), wiping out full fashts, buying new helicopters for our tremendously active army, and building incredible highways to offset the increasing amount of traffic we seem to be getting in this country. Oh, and of course providing enough energy to make sure us greedy citizens get all the power and water we need so that we never have to endure any power cuts.

Well, aside from my sarcastic tone, why is it such a fuss? It's only 1%? And it does go towards helping the unemployed; definately a noble cause. Lets take a quick look at why this is the wrong way to go about it. First, no one has any idea where this money is going to go. There hasn't been any verified auditing done on amounts which have previously been taken out of our salaries (ie, Social Insurance), and we all saw the results a few years ago when it was reported that the GOSI was actually losing money. So where was this money going? Invested in the wrong way? Stolen? Or did someone just lose most of it on the way to the bank? Well, either way, we have no idea where our 5% GOSI deduction is going, and we're not even sure if we will actually recieve any benefit out of it when we decide to retire. So when the decision was given to increase our total GOSI deduction to 6% a few months ago, most people didn't take it very lightly. Add to that another 1% for the unemployed, which isn't even going through the GOSI this time, meaning harldy any record keeping, and people's blood starts to boil. Ironically enough, the deduction starts in a June, so you're boiling both figuratively and literally.

So, we have no idea where our money is going. Second of all, none of us actually consented to this deduction. It's not exactly a big amount, but if its ok for 1% to be deducted "for the humanitarian purpose of giving the unemployed an income", then it wouldn't be a problem to take an extra half a percent later, to cover the increasing costs of financing the unemployed. Or another 1%... Or another 2%... And so on.

Another thing, let's take a look at the people exempt from this deduction. First of all; the military. Now why on earth would the military be exempt? As a reward for their heroic acts towards keeping Bahrain free from hostile take-over (speaking of which, when was the last time the Bahraini army participated in a war?) What makes them different from any other employees (besides the fact that a large percentage of them aren't of Bahraini nationality?).

Second group of exempt people; ministers. Wow. Why would the ministers be exempt? After hearing the passion in the speech that the Minister of the Dept of Labour gave a few days ago, and how strongly he was arguing in favor of the deduction, you would believe that he would eagerly increase his contribution just because of how strongly he believed in the cause. So to turn around and say that ministers are exempt.. Hmm.. There's something fishy going on here.

Third group of people who are exempt from paying the 1%, our beloved council of representatives, our parliment, the people who actually came out with this decision. It all makes total sense now.

What is also amusing about this is the events that have actually led to this. A few months ago, inflationary measured caused a rise in prices of a number of day-to-day items. The people retaliated by requesting higher salaries in order to overcome the inflation. The government/parliment or whatever side comes out with these bodiless comments states that they will ensure that salaries are increased. A few months later, their GOSI deductions are increased by 1%. A while later, another 1% deduction is introduced to combat unemployment. I don't know whether to laugh or cry.

I personally have no problem with 1% being taken out of my salary to help the unemployed. I don't mind having 5% taken out of my salary to help the unemployed and the poor. I don't even mind 20% instead of the current 6% GOSI being deducted from my salary if it really is going to contribute back to me when I retire and help me lead a semi-comfortable life. But with the amount of trust I have into where my money is going, I would rather keep my money, and throw it into a saving account or some sort of investment, because that would generate a real return for me. I don't know whether my GOSI deductions are being used to generate returns in low yield investments, high risky ones, or whether they've already been lost. I don't know whether my GOSI deductions are even being used by someone to buy a new car, or build a huge mansion for someone. With the amount of trust I have into where my money is going, I don't think i'm comfortable with having more than 0% taken out of my account. Leave my money alone!

1 comment:

Cradle of Humanity said...

Thanks for the post, very well said and couldn't agree more!