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.
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.
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."
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.
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. -email@example.com