The Sultanate of Oman is set to implement a 5 percent value-added tax (VAT) from early next year, media reports said. Currently, the UAE, the Kingdom of Saudi Arabia and Bahrain are the three GCC countries that have levied VAT.
In 2016, all the six members of the GCC had agreed to introduce a 5 percent VAT. The UAE introduced the VAT in 2018 followed by Bahrain in 2019.
Ali bin Masoud Al Sunaidy told Bloomberg at the the World Economic Forum in Davos, “VAT is something people don’t like it but this is something we have been lobbying for. It will come into effect sometime in the beginning of next year.”
According to a EY study, GCC countries that have adopted VAT are expected to generate additional annual revenues of $25 billion. This is helpful, especially when countries are aiming to generate more revenues. For example, Muscat is targeting an economic growth between 2.5 percent and 3 percent this year, the media reports said.
Previously, the Sultanate’s GDP took a sharp dip from 30 billion Omani riyals to 26 billion riyals. However, its economy has since rebounded to 30 billion riyals, according to Al Sunaidy.
The Sultanate is introducing a set of reforms this year to diversify its non-oil economy. Earlier this month, it also introduced a new foreign domestic investment (FDI) law.
The Sultanate’s decline in oil revenue is affecting its sovereign debt which is expected to increase more than 60 percent this year, observed Fitch Ratings.