Businesses are eagerly awaiting Oman’s budget for 2016 and its 5-year plan for 2016-2020, both of which are expected to be decreed on 3 January 2016. With oil prices continuing to fall well the price of around 80 US dollars (USD) used to budget the 2015 revenues, the Omani government is under pressure to review fiscal policies and consider options to increase revenue from taxes.
The 2015 budget projected a 25 percent increase in revenues from taxes and fees without any change to corporate tax rates. Tax revenues are expected to decline in 2016 if the tax rates and tax base remain the same as in 2015. Some tax policy options that the Omani government could consider include:
Amendments to increase tax rates and the tax base could be introduced before the end of this year, independent of the budget announcement in January 2016. Amendments to other provisions of the tax law are also expected, including provisions to deal with Islamic Finance and amendments to current charitable donations rules to clarify that gifts-in-kind are tax-deductible, subject to the limitations currently provided in the tax law.
In the past, there has been debate about the introduction of a remittance tax and personal income tax, but these taxes are unlikely to be considered in the short term. However, Oman is actively pursuing the introduction of value-added taxes, either in conjunction with the other GCC countries or, if needed, on its own. Given the time needed to implement such a VAT, the earliest year it could take effect is 2017.