By Sayyid K. Jaffar
With flaccid world markets, all the oil-rich producers of the Gulf are feeling the financial pinch and making their individual plans on how best to weather the storm. In a move that reflects the altruism of its leadership, Oman has announced that it will increase taxes – but only on its wealthiest citizens. Oman’s richest individuals will be targeted in a new taxation levy aimed at boosting government revenue, a senior government official has confirmed.
In order to counter the effects of falling oil revenues Oman’s 2017 budget will include a raft of new austerity measures, as the projected average price of a barrel of oil remains set to languish at $45 next year. However, bucking the popular global trend of offering tax incentives to the very rich at the expense of the poor, Oman has chosen to target those who can best afford it to ensure that the country – and its people – continues to develop and prosper.
Further moves to bolster state finances as the continuing low oil prices slash its revenues, include a decision to raise electricity prices for large government, commercial and industrial users from the beginning of 2017. All government, commercial and industrial consumers of at least 150 megawatts per year will pay the higher tariffs.
Initially the move will impact upon around 10,000 of the country’s largest energy consumers, those representing only 1% of the current total of electricity consumers in Oman, but who, between them, account for 30% of the total supply of electricity.
The same group of end users also accounts for around 20% of the annual government-sponsored subsidies for power generation; consequently the new tariffs are expected to save the State’s coffers OMR100m (around $260m) annually.
The Ministry of Finance has issued 20 circulars so far this year aimed at controlling and managing spending.The latest taxation measures, suggested by Oman’s Shura Council, include levies on items ranging from ministers’ cars to ministry lights.
However, the 2017 budget will not include any cut in wages and salaries as well as the basic services provided to citizens, Saleh Musin, head of the council’s Economic Committee, has confirmed.
The minister added that the budget would be similar to 2016’s, which predicted a OMR3.3bn (Dhs31.47bn) deficit. “To increase non-oil revenues, Oman will increase taxes on individuals but the Economic Committee affirmed that levying taxes should apply on rich people, not middle and low income individuals,” Musin told the local press.
Oman posted a budget deficit of OMR4.5bn in 2015, as revenues declined by more than 50 per cent following the oil price plummet from 2014.