Similar to its neighboring oil-dependent countries, Oman is also exploring different choices that can help its economy overcome the acute economic consequences of the lockdowns imposed following the novel coronavirus outbreak, including a new income tax introduced in the country for the first time in its history.
The Oman government had been trying to tackle the economic impact of COVID19 since the very early days the country recorded infection cases last March. Back then, the Central Bank of Oman had announced a comprehensive incentive package that aimed to pump an additional $20.78 billion into the economy, hoping that this decision can support the country's economy throughout the months to follow.
Pressured by the universal drop of oil prices in addition to the blow suffered by the tourism sector in the country, driving the country's preliminary deficit as high as 15.8%, Oman had no choice but to take heavier measures to maintain its financial stability.
The most recent was included in the country's 2020-2024 economic plan, where an income tax was introduced to be imposed on high earners starting from 2022, which should lower the Omani fiscal deficit to 1.7% of gross domestic product by 2024, Reuters reports.
Additionally, Oman has taken several steps earlier to reduce government spending, including a 10% cut in allocations for civil ministries and government departments and a 5% cut in allocations for the civil, security, and military entities. Moreover, the country is looking into other options to revive its economy, including but not limited to boosting the formerly-strong tourism sector by offering fee-free visas to tourists. Also, the Omani government is planning to decrease subsidies on electricity and water to help support the local budget.
By issuing the first income tax on wealthy individuals, Oman makes history as the first GCC state to slash one of the most important factors that attracted foreign expats to work and invest in the country. Non-Omani nationals make up about 40% of the country's population.
Personal income tax implementation in Oman would be a game-changer for the region. https://t.co/snAAXZ1kv4 For just a snap-shot at why raising govt revenue is so important right now, here are some basic data points on Omani public finance. *Thanks to my new Haver Analytics access— Karen Young (@ProfessorKaren) November 2, 2020
However, it is still unclear if the newly announced tax will affect Omani nationals and expats residing in the country alike, especially that an exemption to expatriates could be considered in order for the government to encourage foreign investments that are much-needed for the country's recovery.
While it's very early to examine the success of the new tax, especially that it doesn't go into effect before 2022, experts have weighed in the possibility of other GCC states following in Oman's steps, as all oil-dependent states set plans to diversify their economies and avoid economic shakes similar to the one following the oil crash in 2014 or the one triggered by the pandemic earlier this year.
Do you think the remaining tax-free GCC countries will consider introducing similar tariffs anytime soon?
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