Islamic Finance

Oman’s Sultan expected to approve VAT to boost economy

Published 03 Sep,2020 via Bloomberg Markets - Oman’s legislature is proposing to implement a value-added tax after January 2022 as falling oil revenue pressures its finances, following similar moves by Gulf Arab neighbors.

A joint committee of the State Council and Shura Council suggested the time frame and sent a draft law for approval to Sultan Haitham Bin Tariq Al Said. He took power in January vowing to take unpopular steps to bolster the near $80 billion economy that his predecessor had sidestepped.

Oman would become the fourth of the Gulf Cooperation Council’s six states to collect VAT, a move agreed by the bloc years ago. The UAE imposed a 5% VAT in 2018 on most goods and services, while Saudi Arabia tripled its levy to 15% earlier this year. Bahrain imposed VAT in 2019. Only Kuwait and Qatar, which is currently boycotted by a four-nation Arab alliance, are yet to announce plans for imposing the tax.

The joint committee also proposed exempting low-income citizens from the tax. Members of Oman’s State Council are appointed, while the Shura Council is elected.

Shortly after succeeding his cousin, Sultan Haitham said the largest Arab crude producer outside OPEC would lower its debt and review the role of state companies in an economy that has since been hit by the coronavirus pandemic. In May, he slashed salaries for new civil servants by as much as 23%.

The International Monetary Fund expects Oman’s budget shortfall to reach 16.9% of gross domestic product this year, hit by the pandemic and declines in oil prices. Both Moody’s Investors Service and Fitch Ratings have downgraded the country’s sovereign ranking this year, citing financial challenges.

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Zainab Fattah and Turki Al Balushi