Exclusive to The Middle East Online – New expatriate tax could add billions to Omani coffers

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A new proposal to impose a tax on the billions of riyals sent home by expatriate workers in Oman, could add as much as 60 million riyals (OR1=$2.6), annually to the Sultanate’s coffers, according to reports in the local Times of Oman

Earlier this week, the Majlis Al Shura approved an advisory committee’s proposal to help the country overcome a budget deficit resulting from the fall in the international oil price.

The economic and financial committee of the Shura Council, the country’s consultative body, recommended imposing a tax of 2% on expatriate remittances during their discussions on recommendations to balance the draft budget.Slide1

The announcement has sparked mixed reactions. The tax would hit more than 1.9 million foreign workers who help shore up the Omani economy.

Shura Council member, Tawfiq Al Lawati, who was present at the meeting, told the local press that remittances from Oman’s expatriate community stood at OR3.502bn ($9.1bn) in 2013, compared to OR3.109bn ($8.073bn) the previous year, an increase of more than 12%. Bearing these figures in mind, the Shura Council committee has estimated that around OR60m ($156m)  could be earned by imposing a 2% tax on remittances.

A report by the Central Bank of Oman issued in July, noted the rising rate of overseas remittances, which it attributed to the rise in expatriate workers in the private sector, which numbered 1,527,000 in 2013, compared with 1,316,000 the previous year.

Lawati explained: “The budget is based on an oil price set at $85 per barrel. However, the global average has fallen to $75. We have therefore proposed a revision to $80. Even with the revision, we are facing a budget deficit of OR500-700m ($1,300m-1,82m) .” Lawati went on to confirm that taxing foreign worker remittances was just one of a number of measures on the table to combat the budget deficit.

the wave 2While there are widespread concerns that if Oman goes ahead and implements these measures to help balance its budget, other GCC states will follow suit and impose a tax on their own foreign workers, there are also real worries that such moves could spark a rash of illegal exchanges by people wanting to avoid paying the charge.

The CEO of Oman UAE Exchange, Tonny George Alexander noted: “If it is a government decision, we have to follow it. But our concern is that this may encourage an increase in illegal money transfer.”

“The move would undoubtedly generate revenue for the government but at what cost? The restrictions on moving money, part of the drive to cut off financial supplies to terrorist groups, will be flouted by those trying to save a few riyals in tax and then the whole process is thrown into confusion. The Shura Council must ask itself, is this tax worth the risk,” a local businessman told The Middle East magazine.

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