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Non-OPEC oil producer Oman, which is part of the OPEC+ alliance, could become the first country in the Gulf Cooperation Council (GCC) to introduce an income tax on individuals as oil-dependent economies in the Middle East reel from the price and demand crash.
Oman plans to introduce in 2022 a personal income tax on wealthy individuals, its finance ministry said on Sunday, as carried by Reuters.
The Middle Eastern oil producer heavily depends on oil income for its budget and has been one of the most affected economies in the region after prices crashed earlier this year. Oman’s new economic plan through 2024, which will include the income tax on wealthy individuals from 2022, is aimed at reducing the widening budget deficit of the country and increasing the non-oil revenues.
Oman’s plan would make it the first member of the Gulf Cooperation Council (GCC)—which also includes Bahrain, Kuwait, Qatar, Saudi Arabia, and the United Arab Emirates (UAE)—to introduce an income tax on individuals.
Oman’s economy is set to contract by 10 percent this year, according to the International Monetary Fund (IMF). Oman is cutting some spending and starting a value added tax (VAT). Elsewhere in the GCC, the United Arab Emirates (UAE) and Bahrain have also introduced VATs, while the Emirates, Qatar, and other GCC members are cutting inefficient fuel subsidies, IMF Managing Director Kristalina Georgieva said at the end of October.
“All of this is very positive, and it needs to continue,” Georgieva added.
Oman has been downgraded twice so far this year by both Moody’s and Fitch because of the low oil prices that have resulted in sharply lower oil revenues and widening deficit.
In its second downgrade of Oman this year, Fitch said in August that it expects Oman’s fiscal deficit at nearly 20 percent of GDP in 2020, up from around 8 percent of GDP in 2019, as a 32-percent crash in revenues driven by lower oil prices and production would more than offset an 8-percent cut in spending.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.