Oman plans to impose a 100 percent tax on tobacco, alcohol, pork meat and energy drinks as of June 15 and a 50 percent tax on carbonated drinks, according to the Secretariat General for Taxation.
The Sultanate is seeking to boost revenues by imposing selective taxes in order to avoid declining oil revenues.
The Secretariat confirmed that the “selective tax” is for “maintaining public health”, under the agreement established in 2016 between the GCC countries.
Director General of Survey and Tax Agreements Sulaiman bin al-Aadi noted that this is a consumption tax and is considered to be an indirect tax.
“Thus, the final charge is on the consumers, but it is collected in advance at a stage of the supply chain, notably through the business sectors.”
Oman has slowly embarked on fiscal reforms aimed at reducing the budget deficit while relying more on external financial resources through bonds and loans to compensate for treasury deficits.
Oman could generate around $260 million a year by implementing the selective tax on such products, the head of the economic and financial committee at the consultative Shura Council Saleh bin Said Masan said in November.
Oman’s economic growth may speed up to 2.3 percent from 2.1 percent, according to economist estimates compiled by Bloomberg. However, the data showed that the current account deficit may widen to 9.1 percent this year.
Bloomberg noted that Oman delayed the introduction of the taxes as concerns grew that it may follow Bahrain’s steps and seek a bailout from Gulf neighboring countries to speed its slow fiscal reforms.
The Sultanate originally planned to impose a value-added tax of five percent in 2018, but it is due to start in 2020.
In April, Standard & Poor's Global Ratings cut its outlook on Oman to negative from stable, saying the change reflected “the risk that in the absence of substantial fiscal measures to curtail the government deficit, or a more favorable external environment, fiscal and external buffers will continue to erode.”
Earlier this year, Oman said it expected the budget deficit to reach $7.27 billion, equivalent to nine percent of GDP.
Last month, Oman hired a group of international banks for a planned bond issue which could go up to $2 billion in size, sources told Reuters.
