The bill is yet to be approved by the parliament's upper house, which is expected to hold a similar session later this week.
Bahraini legislators have approved a draft law that will pave way for the introduction of value-added tax (VAT) for the first time in the Kingdom, according to local newswire, Bahrain News Agency.
The move follows a $10 billion aid package offer from the Kingdom’s wealthier neighbours Saudi Arabia, the UAE and Kuwait to avoid the risk of a debt crisis in the country, which was also tied to fiscal reforms.
The House of Representatives approved a Gulf Arab agreement to introduce VAT after a royal decree ordered parliament to hold an extraordinary session.
The introducing of a five per cent VAT was part of the GCC agreement in 2018, a big step for governments that have traditionally levied little tax and relied on oil revenues. Saudi Arabia and the UAE introduced VAT in earlier this year and Kuwait is set to introduce the reforms by 2021.
Bahrain is yet to introduce other reforms, including changes to the pension system and a new subsidy programme in a bid to fix its public finances.
The Kingdom released a 33-page fiscal plan on Friday to fix its debt-burdened finances and essentially abolish its budget deficit by 2022.