The Sultanate of Oman is considering introducing an income tax on high earners, according to the finance ministry’s 2020-2024 economic plan, reports Reuters.
“This initiative is still under study, all aspects of its application are being considered. It is expected to apply this tax in 2022,” the medium-term economic balance document said.
“An income tax on individuals would be a first in the Gulf. I think it will be a significant move and closely watched by other GCC countries,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank.
Dried up oil
The aim is to bring down Oman’s fiscal deficit to 1.7% of GDP by 2024.
It currently stands around 15.8%.
It is also looking to increase non-oil reserves to 35% of total government revenue by 2024 – up from 28% this year.
According to the International Monetary Fund (IMF), Oman’s economy is expected to contract by 10% this year – which would be the sharpest decline in the Gulf.
Big shake up?
It is not clear what would qualify someone as a ‘high earner’ – but the fact that Oman is even considering such a move could have significant consequences across a region.
In 2018, a slump in the price of oil saw six Gulf states agree to introduce 5% VAT.
Several years ago, that would have been unthinkable.
So while Oman is, so far, the only country to potentially embark on individual income tax – the volatile price of oil and growing deficits could force the hands of its neighbour and see them also consider taking – what has always been considered – an unthinkable step.
