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Oman Urged To Broaden Tax Base

by Lorys Charalambous,, Cyprus

20 January 2014

The government of Oman needs to broaden its tax base in order to ensure the revenue inflows necessary for new projects and infrastructure development, Davis Kallukaran, Managing Partner of Horwath Mak Ghazali, said at a workshop on Oman Taxation.

Analyst predictions that global oil prices will continue to slide have added urgency to the need for revenue diversification.

Kallukaran noted that Oman's tax revenue accounts for only 1.5 percent of gross domestic product (GDP), much lower than countries like India and the United States. Revenue from income tax amounts to about OMR350m (USD909m) per year, while customs duties provide OMR180m per year.

According to Kallukaran the Sultanate needs OMR15bn for new projects, infrastructure improvement, human resource development and the creation of better facilities.

The International Monetary Fund (IMF) forecasted in October 2013 that Oman will face a budget deficit in 2015, with a funding shortfall of 0.2 percent of GDP which will widen to 7.1 percent by 2018. However, falling oil prices combined with recently announced higher social welfare spending and public servant wage increases could mean the shortfall is even bigger than the IMF's prediction.

The IMF recommended in its 2013 Article IV report that Oman consider implementing a value-added tax, but while the Omani government has indicated that such a levy may be introduced in the next few years no further developments have taken place.

Oman's Shura Council in November last year suggested that the government impose a two percent tax on the remittances of its foreign workers (a policy which would yield about OMR62m annually) but the proposal was shot down by the State Council.

TAGS: tax | gross domestic product (GDP) | budget | International Monetary Fund (IMF) | Oman | Tax

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