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The New Arab Staff

Cash-strapped Oman expected to impose unprecedented income tax

Oman could become the first GCC state to impose personal income tax. [Getty]

Date of publication: 2 November, 2020

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Oman is set to introduce an income tax on high earners starting in 2021, potentially becoming the first-ever GCC state to do so.
Oman's finance ministry announced it is considering rolling out unprecedented income taxes to bridge the country's budget deficit after oil prices crashed with the onset of the coronavirus pandemic.

The measure, part of the country's 2020-2024 economic plan, would also see to the reduction of government spending, reports said.

None of the six Gulf Cooperation Council states – all oil-revenue reliant countries – currently collect taxes from individuals. 

According to Reuters, the plan – still being studied – aims to bring down Oman's fiscal deficit from a preliminary deficit of 15.8 percent of gross domestic product this year to only 1.7 percent by the year 2024.

While the tax would only apply to "high-income individuals", the plan so far does not specify exact income brackets.

"Oman needed urgent action and the plan is a start. Some of the goals are ambitious to the point of unrealism such as the narrowing of the budget deficit to 1.7%," Bloomberg quoted Ziad Daoud, a chief emerging markets economist, as saying.

Government in the Gulf countries have stopped short of imposing taxes, and Oman is not the first state to make such an announcement.

In July, Saudi Arabia said it was pondering introducing some form of income tax in a bid to weather one of its worst economic crises in years, but said it was "not imminent".

Read also: Qatar gives Oman $1 billion cash injection to help sultanate amid financial crisis

Oman, Saudi Arabia and the United Arab Emirates have all introduced value-added taxes as a result of the oil crash which began in 2014, with Oman introducing a five-percent VAT just earlier this month.

Oman's government is also reportedly planning to gradually pare the state's subsidies on electricity and water with a plan to remove them completely by 2025.

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