DUBAI - Oman expects to introduce an income tax on high earners in 2022, the finance ministry said in a 2020-2024 economic plan, new details of which were published late on Sunday, as the Gulf state seeks to restore finances battered by low oil prices.
The plan aims to bring Oman's fiscal deficit down to 1.7% of gross domestic product by 2024, from a preliminary deficit of 15.8% this year.
It also has a target of increasing non-oil revenues to 35% of total government revenue by 2024, from 28% this year.
None of the six Gulf Cooperation Council (GCC) states, all oil producers, currently collect income tax from individuals.
Oman's Sultan Haitham, who took power in January, last month approved the medium-term fiscal plan to make government finances sustainable as the coronavirus crisis and low oil prices strain state coffers.
Some details of the plan emerged in a bond prospectus last month but without a date for the introduction of income tax. Revenues from it would be used to fund social programmes, the plan said.
"An income tax on individuals would be a first in the Gulf. I think it will be a significant move and closely watched by other GCC countries," said Monica Malik, chef economist at Abu Dhabi Commercial Bank.
"This initiative is still under study, all aspects of its application are being considered. It is expected to apply this tax in 2022," the 2020-2024 medium term economic balance document said.
The plan also aims to redirect state subsidies to only those groups who need it, rather than subsidising all users. Calculating new electricity and water tariffs will be done gradually in the coming years, the document said.
According to the International Monetary Fund, Oman's economy is expected to shrink by 10% this year, the biggest contraction in the Gulf, and its fiscal deficit could widen to 18.3% of GDP from 7.1% last year.
Sultan Haitham in mid-October said a 5% value-added tax would come into force in April 2021, as part of efforts to diversify government revenues.
All six Gulf Arab states agreed to introduce 5% VAT in 2018 after a slump in oil prices hit their revenues.
(Reporting by Lisa Barrington and Davide Barbuscia; Editing by Catherine Evans and Giles Elgood) ((firstname.lastname@example.org;))