The Sultanate of Oman has reportedly decided to levy a 5 percent value-added tax (VAT) on all commodities barring few exemptions from April 2021.
Oman’s ruler His Majesty Sultan Haitham Bin Tarik issued a royal decree today to set forth necessary arrangements for the same. Essential food items, medical care, education and financial services are expected to be exempted from the newly planned tax regime.
One of the biggest oil exporters outside OPEC, Oman like its oil-rich neighbors has been struggling to make ends meet amid the pandemic-induced slowdown and consistent low oil prices. The country is betting on revenue inflow from the VAT mechanism to support its depleting reserves and high debts.
Lower oil prices had forced almost all gulf Arab nations to enforce VAT as part of their revenue funnel in 2018 with UAE and Saudi Arabia implementing the 5 percent tax in the same year. Neighbor Bahrain followed with its own 5 percent taxation from 2019. Apart from Oman which will be implementing the taxation next year, only Kuwait and Qatar and yet to follow the group after their support to do so in 2018.
Oman implemented several expense cuts across the sectors including defense and security to curb the outflow of its revenues. As per the data revealed by the International Monetary Fund, the country’s budget deficit share to its gross domestic product (GDP) is forecasted to be among the highest in the region.
Even with major spending cuts, Oman reported a deficit of $2.15 billion (826.5 million Qatar rials) in the first six months of the year which represented a 25.1% increase in deficit compared to the previous year.