Abu Dhabi, UAEThursday 27 February 2020

Oman set to introduce VAT early next year

Economy minister Ali Al Sunaidy said he expects GDP growth of 2.5-3 per cent in the sultanate this year

Oman, one of the smaller producers for oil and gas in the Middle East has been prioritising the development of its gas resources. Corbis
Oman, one of the smaller producers for oil and gas in the Middle East has been prioritising the development of its gas resources. Corbis

Oman will introduce VAT "some time during the beginning of the year 2021", the country's Minister of Commerce and Industry, Ali Al Sunaidy.

The introduction is "something that people don't like, but this is something that we have been lobbying for", he said in an interview with Bloomberg Television on the sidelines of the World Economic Forum in Davos on Monday.

All six members of the Gulf Cooperation Council agreed in 2016 to introduce a 5 per cent rate of VAT but so far only three states have done so. Saudi Arabia and the UAE both introduced the tax in January 2018 and Bahrain followed suit last year.

Oman, whose economy has suffered in recent years following the collapse in oil prices in 2014,

held off from introducing VAT so far despite calls from the International Monetary Fund to speed up its roll-out.

The sultanate has been introducing a series of other reforms, including cuts to fuel and electricity subsidies. It has been "able to remodel ourself and re-engineer some of our deals" and has recently introduced a new foreign investment law, Mr Al Sunaidy said.

The new FDI law came into force earlier this month. "We have also a new PPP law," he added.

GDP growth in Oman was expected to flatline in 2019 before rebounding to 3.7 per cent this year, the IMF said in its most recent regional economic outlook in October last year.

"Unless something big interrupts the neighbourhood, we are looking for 2.5-3 per cent of average annual growth," Mr Al Sunaidy told Bloomberg. "And I think we are able to do that because if you look at the history of Oman since 1970 we ran a growth rate of about 6 per cent. It only got really [bad] when we saw oil prices slump from $114 way down to $26, $25. That was something huge we couldn't cope with."

Sultan Haitham bin Tariq was sworn in as Oman's new leader earlier this month following the death of Sultan Qaboos bin Said, who ruled the country for almost 50 years.

Oman's relationship with the world "will be unaffected" by the transition, Mr Al Sunaidy said, pointing out that the new leader headed Oman's Vision 2040 economic transformation strategy — a draft version of which was published in September last year.

The decline in oil revenue in recent years means Oman's sovereign debt as a percentage of GDP has been steadily increasing, and is expected to grow above 60 per cent this year, according to a note published earlier this month by Fitch Ratings.

Rival ratings agency Moody's Investors Service said that it expects the new leader "to follow in the footsteps of his predecessor by maintaining the country’s foreign policy neutrality in the region and a very gradualist and socially-sensitive approach to economic reforms".

In the short-term, Sultan Haithan bin Tariq is likely to avoid "unpopular fiscal consolidation measures”, said Moody's vice-president Alexander Perjessy.

Updated: January 21, 2020 06:34 PM



Most Popular