Expats' income in Oman will remain tax-free: Ministry of Manpower
Oman is against introducing income tax for expats due to pressures such as the recent removal of fuel subsidies, a factor that has added to inflation, and the introduction of VAT . (Shutterstock)
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Expats in Oman can heave a sigh of relief, at least for now, after the Sultanate confirmed there are no plans to make foreign workers pay income tax.
Saudi Arabia had last week announced that it was considering introducing the tax for its expat population.
The news sent a ripple through the GCC expat population, but Oman’s Ministry of Manpower, in a statement to the Times of Oman, confirmed it has no plans to go down that route.
Said Salem Al Saadi, advisor at the Ministry of Manpower, said the country does not encourage income tax, particularly when it is only targeting the expat community.
“We are not encouraging this. Every country has its own procedures, and in this country, we do not encourage such a tax. If there is any kind of tax, it will be for everyone, expats and Omanis. Expats are not strangers for us, and they work according to the Labour Law. The Labour Law controls all the expats and it does not involve income tax.”
Saudi Arabia’s finance ministry recently confirmed it was planning to introduce income tax on its expatriate population to fund a $72b plan to diversify economy.
“We don’t have a system of imposing income tax on people here, whether Omanis or otherwise, and levy it only on companies. Personally, I would avoid it, especially with the current oil prices. It is not possible for people to pay tax when they don’t know what it will be spent on,” said Tawfiq Al Lawati, Head of Economic Committee at Majlis Al Shura.
“If I, as a Shura member, implement the income tax, I wouldn’t be able to face people on the streets and I am not convinced about personal taxes,” he added.
Ahmed Al Esry, Managing Partner, Ernst and Young, Oman said that he don’t see income tax being introduced in Oman in the near future; there are no signs or indications about such a move.
“I don’t think it is the right time as so many things are happening. With the removal of fuel subsidies, a factor that has added to inflation, and the VAT coming in, I don’t think the government will try clubbing it all together, because at the end of the day, this will affect ordinary people,” said Ahmed.
“So I don’t think there is any intention of introducing income tax in Oman,” Ahmed said.
Expatriates, however, said taxing them at a time when the government is going through an economic downturn will not be the right thing to do.
“It will hit us very hard,” said Mohammed Ragheb, an expat who has been working in Oman for the last 10 years.
The president of the Bangladeshi Social club, Mohammed Shafiqul Islam Bhuiyan, said, “People have been already burdened with hike in petrol prices and have not received salary increments. Income tax will force many poor Bangladeshis to leave the country.”
On the other hand, there are people who don’t mind paying taxes. “As long as the money comes back in the form of growth of the country, and added facilities to people, they should not mind it,” said Shiv Gupta, CEO of a private limited company.
Marlene, a German national, said taxes should only be applied if benefits can be ensured.
“I come from a country where we pay high taxes, but in return also receive free health service, better infrastructure and child care. Therefore, I welcome the idea if it benefits the country.”
“As oil prices have declined, many budgetary controls are already affecting the benefits and perks of nationals and expats.
“‘Personal tax free environment’ is an added attraction to many professionals working here,” said Jose Chacko, a Financial Advisor based in Oman.
“If any tax on personal income is introduced, it will adversely affect the labour market and productivity. Before implementing any such measures, a serious study should be undertaken about the socio- economic impact in the long and short term. The proposed VAT system will contribute better to improve the troubled economy without much negative impact,” he added.
“Most countries have personal income tax, so even if I were to move, it would mean trying to find a specific place that has no income tax. That fact alone would not make me move,” said Marianne Held, a German national in Oman.
While some do not mind paying income tax, there are other expats who might even leave the country if such a tax is introduced.
Irina, a Croatian national who works for a private company, said she will leave the country if the taxes are too high and there is nothing in return. “I might as well leave the country for good, or might perhaps only stay if I can get free healthcare like any other citizen, then I can happily pay it.”
Hassan, a Bahraini national who works in Oman, supports the idea, but only if tax rates are low. “If an income tax is introduced, the rate should be very low. Only then can I support it.”
“We will certainly not leave the country just because of income tax as other neighbouring countries and home countries are already taxing people through various fines/payments etc. However, I would expect a hike in salary. Else, the company should provide me with alternate ways to save taxes and remunerate me in other ways, based on the number of years spent in the organization and the country,” said Vinod Verma, an Indian expat in Oman.
According to Dr Anchan C K, Managing Director, World Wide Business House, an international business advisory firm, it’s not wise to introduce such a measure at a time when the Sultanate is trying hard to attract direct foreign investments and not having income tax was one of the most attractive prospects here.
“Deepening the taxation base will be an important step to increase non-oil revenue, which will likely start with VAT first, but introduction of income tax will be a notable step and will be extremely challenging.”
“I do agree that most countries, such as the USA, Canada and Australia have income tax. However, it is applicable to all those who are employed, irrespective of whether are nationals or expats. The only difference could be in the income slab.”
He also highlighted that other countries provide social security and a variety of facilities to the expatriates, right from opportunity to own property, own business and so on, in return for the taxes.
“People immigrate to gain financial stability and better future prospects. If another country offers a potentially better future, higher wages and a polished lifestyle, people will think of immigrating to it,” he added.
It one-third of residents, who are non-Saudis, were made to pay income tax, it would raise a significant amount of non-oil revenue for the government. However, it may also make it difficult to lure expatriates to the conservative kingdom.
Like other Gulf countries, Saudi’s income tax-free status is a key factor that attracts foreigners.
A similar idea was floated during a period of low oil prices in the 1980s, but foreigners were so outraged by the potential impact that some went on strike, including military contractors, grounding air force planes until the authorities backed down.
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