Following in the footsteps of its Gulf neighbors, Bahraini legislators approved a draft law this week that would see value-added tax (VAT) introduced in the kingdom, state news agency BNA said in a statement.
In an extraordinary session convened by royal decree, Bahrain’s Representatives Council decided to move ahead with VAT plans, referring the matter to the parliament’s Upper House.
The session also saw the parliament consider other reforms, including changes to the pension system.
The move comes shortly after Saudi Arabia, Kuwait and the UAE offered an aid package of about $10 billion to Bahrain, in an effort to support the financial stability of the country and stimulate its economic growth.
GCC member states have collectively agreed to introduce VAT at a 5% rate, as regional governments try to reduce their reliance on oil revenues.
So far, Saudi Arabia and the UAE have introduced the tax, while earlier this year Kuwait announced it was delaying the implementation of VAT until 2021.
A paper published by the staff of the International Monetary Fund (IMF) in December 2017 estimated that VAT in the GCC could help generate additional revenue in the range of about 1.5-3.0 percentage points of non-oil GDP.
Implementation of VAT could be particularly beneficial to Bahrain, which has the lowest break even oil price among its GCC peers.