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Oman to Impose Selective Taxes

General view after Cyclone Mekunu in Salalah, Oman May 26 2018. (Oman News Agency)
General view after Cyclone Mekunu in Salalah, Oman May 26 2018. (Oman News Agency)
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Oman to Impose Selective Taxes

General view after Cyclone Mekunu in Salalah, Oman May 26 2018. (Oman News Agency)
General view after Cyclone Mekunu in Salalah, Oman May 26 2018. (Oman News Agency)

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. 

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Arab World

How Did Iraq Survive ‘Existential Threat More Dangerous than ISIS’?

Iraqi sheikhs participate in a solidarity demonstration with Iran on a road leading to the Green Zone, where the US Embassy is located in Baghdad (AP). 
Iraqi sheikhs participate in a solidarity demonstration with Iran on a road leading to the Green Zone, where the US Embassy is located in Baghdad (AP). 
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How Did Iraq Survive ‘Existential Threat More Dangerous than ISIS’?

Iraqi sheikhs participate in a solidarity demonstration with Iran on a road leading to the Green Zone, where the US Embassy is located in Baghdad (AP). 
Iraqi sheikhs participate in a solidarity demonstration with Iran on a road leading to the Green Zone, where the US Embassy is located in Baghdad (AP). 

Diplomatic sources in Baghdad revealed to Asharq Al-Awsat that Iraqi authorities were deeply concerned about sliding into the Israeli-Iranian war, which they considered “an existential threat to Iraq even more dangerous than that posed by ISIS when it overran a third of the country’s territory.”

The sources explained that “ISIS was a foreign body that inevitably had to be expelled by the Iraqi entity, especially given the international and regional support Baghdad enjoyed in confronting it... but the war (with Israel) threatened Iraq’s unity.”

They described this “existential threat” as follows:

-When the war broke out, Baghdad received messages from Israel, conveyed via Azerbaijan and other channels, stating that Israel would carry out “harsh and painful” strikes in response to any attacks launched against it from Iraqi territory. The messages held the Iraqi authorities responsible for any such attacks originating from their soil.

-Washington shifted from the language of prior advice to direct warnings, highlighting the grave consequences that could result from any attacks carried out by Iran-aligned factions.

-Iraqi authorities feared what they described as a “disaster scenario”: that Iraqi factions would launch attacks on Israel, prompting Israel to retaliate with a wave of assassinations similar to those it conducted against Hezbollah leaders in Lebanon or Iranian generals and scientists at the start of the war.

-The sources noted that delivering painful blows to these factions would inevitably inflame the Shiite street, potentially pushing the religious authority to take a strong stance. At that point, the crisis could take on the character of a Shiite confrontation with Israel.

-This scenario raised fears that other Iraqi components would then blame the Shiite component for dragging Iraq into a war that could have been avoided. In such circumstances, the divergence in choices between the Shiite and Sunni communities could resurface, reviving the threat to Iraq’s unity.

-Another risk was the possibility that the Kurds would declare that the Iraqi government was acting as if it only represented one component, and that the country was exhausted by wars, prompting the Kurdish region to prefer distancing itself from Baghdad to avoid being drawn into unwanted conflicts.

-Mohammed Shia Al Sudani’s government acted with a mix of firmness and prudence. It informed the factions it would not tolerate any attempt to drag the country into a conflict threatening its unity, while on the other hand keeping its channels open with regional and international powers, especially the US.

-Iraqi authorities also benefited from the position of Iranian authorities, who did not encourage the factions to engage in the war but instead urged them to remain calm. Some observers believed that Iran did not want to risk its relations with Iraq after losing Syria.

-Another significant factor was the factions’ realization that the war exceeded their capabilities, especially in light of what Hezbollah faced in Lebanon and the Israeli penetrations inside Iran itself, which demonstrated that Israel possessed precise intelligence on hostile organizations and was able to reach its targets thanks to its technological superiority and these infiltrations.

-The sources indicated that despite all the pressure and efforts, “rogue groups” tried to prepare three attacks, but the authorities succeeded in thwarting them before they were carried out.

The sources estimated that Iran suffered a deep wound because Israel moved the battle onto Iranian soil and encouraged the US to target its nuclear facilities. They did not rule out another round of fighting “if Iran does not make the necessary concessions on the nuclear issue.”