Oman is expected to introduce an income tax on high earners in 2022, as the coronavirus outbreak and sustained low crude prices have battered the finances of the Persian Gulf nation.
The sultanate would become the first country in the Gulf Cooperation Council (GCC) region to impose income tax on individuals, after the implementation of the new tax plan.
The country’s Finance Ministry said in its 2020-2024 mid-term economic plan on Sunday that it is planning to impose an income tax on high earners.
“This initiative is still under study; all aspects of its application are being considered. It is expected to apply this tax in 2022,” Reuters reported, citing a ministry document.
Oman’s economy is set to contract by 10% this year, according to the International Monetary Fund, and its plans for imposing direct taxes on select high-income individuals is directed towards easing its widening fiscal deficit.
The mid-term plan introduced by the government envisages to bring Oman’s fiscal deficit down to 1.7% of gross domestic product by 2024, from a preliminary deficit of 15.8% this year, the report added.
Non-oil revenue boosts plan
The Finance Ministry is also aiming to boost its non-oil revenues to 35% of total government revenue by 2024, from 28% this year, Reuters added.
Oman’s Sultan Haitham bin Tariq al Said recently gave a green light to the government’s plan to impose income tax on high-earners.
Oman also plans to introduce 5% value-added tax from April next year, as part of its efforts to diversify government revenues.
Several key Gulf Arab states — including United Arab Emirates, Saudi Arabia and Bahrain — had earlier agreed to introduce a 5% value-added tax in 2018 after a slump in oil prices.
Saudi Arabia earlier this year tripled its VAT rate to 15%, aimed at diversifying its non-oil revenues in the wake of Covid-19 pandemic and low oil prices.