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Income tax on the Omani horizon?

by Saleh Al Shaibany
March 02, 2013 , 9 : 52 pm | 4 comments

Muscat: Many believe it is a matter of time before we start paying income tax. Oman has been a tax haven long enough but the government may need to look elsewhere to balance its budget.

Oil and gas are both a finite commodity whose incomes, at the moment, provide the backbone of the government's earnings. Perhaps, it may be the time now that the state should start preparing people to contribute part of their incomes to the national coffers.

Common feature
With corporate tax already a common feature of the state income, Value Added Tax (VAT) is a good start as a personal contribution from workers to help balance the fiscal books.
Of course, VAT will have its costs and will translate to inflation because retailers will pass the new expenses on to consumers. Income tax will not have that severe impact since we already pay 'municipality tax' when we dine out in restaurants and we don't hear anybody complaining.

Soft introduction
A soft introduction of a ceiling of maximum 10 per cent for income tax may not cause much alarm. When this tax is introduced, Oman, of course, will no longer be a tax haven. But income tax will have two-way impact on workers. For Omanis, there will be the usual moans of "we now get a pay cut" and for the expatriates, it would be a matter of whether it is worth continuing to stay in Oman or not. However, when you flip the coin, the government would create a whole new channel of revenues to pay for the infrastructure.

With increasing government spending (an average of 9 per cent a year increase in expenditure in the last five years), even the critics of income tax would know that the state would no longer be able to raise its budget every year without severe consequences. As one Omani financial analyst told me last week, "if you love your country then say 'yes' to income tax."

Firmer ground
Omanis may take home less money after the income-tax deduction but the government would be on firmer ground financially. It would comfortably reduce its dependence on oil production and create new wealth to open up employment, and also build better roads, schools and hospitals.

At the moment, any Omani who complains about the long waiting list for medical care or the quality of educational services, then he has no ground for criticism. Why? Because, the government currently receives no help from its people to finance the growing infrastructural demands.

I think the state slogan, to prepare for income tax should be: "It is time you should stop thinking what your government can give to you, but what you can give to the government in return!"

I might add, so you can continue to enjoy the vast subsidies in petrol, gas, electricity and water bills, among others.

Cutting deficits
For expatriates, income tax may make the pasture across the border greener. Tax-free income has formed the basis of attracting the best minds into the country for the last four decades. But even them, they will appreciate what is needed to be done to cut down on the chronic budget deficits.

In the long run, expatriates as well as nationals would know that more money in the government's coffers would mean bigger investments in projects, which will transform the economy to help the private sector to pay bigger wages to offset the income tax deductions. But the most important thing is that the government would stop looking nervously at the oil prices � whether it is high enough to wipe out the deficit.

It will also mean that the citizens will have a say in the running of the state of affairs when they start making financial contribution. -saleh@timesofoman.com

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Reader Comments

Anand Surana | March 05 at 9 : 33 am

It is much likely that with dwindling resources of oil, Oman will introduce Income Tax. But before introducing it on individuals, corporate income tax could be increased from the current 12%. VAT is another area which should take priority over income tax on individuals. It has to be borne in mind that Oman does have around 33% of expats working there, and unless taxation takes care of them for the long run, it would be difficult to implement taxation.

On Individual Income Tax, if it comes with structured savings schemes providing tax sops, like in India, it will provide the necessary finance to the Government to develop infrastructure, and at the same time, provide respite from income tax to the individuals. It remains to be seen how this could be implemented on expats.

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Ravi Kumar | March 03 at 10 : 12 am

I fully Accept the thoughts of Mr.Masoud Al-Habsi,

Still our people do not understand Monetary Literacy, so they are in dark about it. ISLAMIC BANKING was a pioneer of its kind. Money for Interest should be abolished on this planet.

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human2think | March 03 at 9 : 18 am

I really commend and support the author on his views that people benefiting from the nation should always be ready to give back when the time comes. I would like to point out one thing to the author that all the European countries or Western countries where expats or outsiders are taxed along with their citizens gain the citizenship of those countries over a period of time, if such an arrangement exists in Gulf countries, I am sure none of the expats would mind paying any taxes.

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Masoud Al-Habsi | March 03 at 8 : 23 am

The biggest and almost the only single contributor to the collapse of any economy � as history � clearly points out, is USURY or (Lending Money on) Interest.

I wonder what will happen if it is explained to the masses that all currency in circulation is debt to the banks & earning compound interest as long as it remains in circulation.

Our economy like the world at large, is controlled by its system of credit. Which means the only ones standing out as winners are the Bankers! So more money means even much more is owed to the Bankers. Bankers do not sow, but they reap! More projects means more debt to the Banks. A perpetual debt that we all know can never be paid. This needs to be addressed out transparently even before talking about VAT.

Henry Ford once said: "It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning."

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