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Cash-strapped Oman to break Gulf's income tax taboo to curb deficit

To levy income tax on high earners starting 2022

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Oman

borrowing, fiscal deficit, market, stimulus
The tax would apply to high-income individuals, but the plan — whose implementation is still currently being studied — doesn’t specify income brackets | Illustration: Binay Sinha

Cash-strapped plans to take a step unheard of in the Persian Gulf region: It’s going to start taxing the income of wealthy individuals beginning in 2022, as part of a broader program to tackle a budget deficit that’s ballooned due to low oil prices and the coronavirus pandemic.

By reducing government spending while spurring investments, the plan is projected to bring the budget deficit — estimated to reach nearly 19 per cent of gross domestic product in 2020 by the Monetary Fund — to 1.7 per cent by 2024, the Ministry of Finance said in an emailed statement on Sunday. Revenue from the income tax will be used to fund social programs, it said.

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The tax would apply to high-income individuals, but the plan — whose implementation is still currently being studied — doesn’t specify income brackets.

Affluent governments in Arab Gulf economies have long steered clear of imposing taxes of any kind, both because the region’s tax-free status has been used to attract labour and companies, and because officials feared a possible backlash from citizens who have no say in how the state spends.

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First Published: Tue, November 03 2020. 01:40 IST
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