Cash-strapped Oman to break Gulf's income tax taboo to curb deficit

Topics Oman

The tax would apply to high-income individuals, but the plan — whose implementation is still currently being studied — doesn’t specify income brackets | Illustration: Binay Sinha
Cash-strapped Oman plans to take a step unheard of in the Persian Gulf region: It’s going to start taxing the income of wealthy individuals beginning in 2022, as part of a broader program to tackle a budget deficit that’s ballooned due to low oil prices and the coronavirus pandemic.

 
By reducing government spending while spurring investments, the plan is projected to bring the budget deficit — estimated to reach nearly 19 per cent of gross domestic product in 2020 by the International Monetary Fund — to 1.7 per cent by 2024, the Ministry of Finance said in an emailed statement on Sunday. Revenue from the income tax will be used to fund social programs, it said.

 
The tax would apply to high-income individuals, but the plan — whose implementation is still currently being studied — doesn’t specify income brackets.

 
Affluent governments in Arab Gulf economies have long steered clear of imposing taxes of any kind, both because the region’s tax-free status has been used to attract labour and companies, and because officials feared a possible backlash from citizens who have no say in how the state spends.


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