Up to a quarter of corporate tax revenues, around Dh490m, go unpaid, according to estimates, with the Omani government considering revoking the business licence of offending companies.
Tax evaders in Oman face loss of government contracts
MUSCAT // Tax-evading companies cost Oman up to 50 million rials (Dh490m) a year and the government is ordering an end to the abuse, a tax department official says.
"Certain companies, including multinationals, do not pay tax in time or try to dodge for not paying in full or not at all," an official at the tax department in the Ministry of Finance said in an interview last week. He asked to remain anonymous because he is not authorised to talk to the media.
The government is considering revoking the business licence of delinquent companies, he said, which would prevent them from obtaining new government contracts.
All companies operating in Oman, including foreign and GCC corporations are required to pay a fixed corporate income tax rate of 12 per cent a year.
Oman has no personal income tax or value added tax (VAT) and, apart from corporate income tax, the government charges 5 per cent tax in restaurants and hotels and 3 per cent on real-estate transactions.
Oman had total revenues of 7.915 billion rials last year, up 17.3 per cent compared to a year earlier. From that, 272.6 million rials came from corporate taxes, a decrease of 26 per cent from 2009, according to ministry of finance statistics.
Faisal Al Hadi, a tax consultant at Abu Tamam Auditing Company in Muscat, said, "If the government has missed 50 million rials last year from tax evasion, that is about a quarter of the total tax earnings in 2010. In this light, I support the government's initiative to blacklist tax cheating companies from lucrative contracts."
Oman last year awarded contracts worth about nine billion rials to private companies, both local and foreign, to build three airports, power stations, bridges, roads, schools, hospitals, oil and gas installations and other services.
Others say the government must also clamp down on property tax evasions.
Nasser Al Hassani, the proprietor of the Barka Estate Agency Services, said: "I am sure corporate income tax provides the backbone of all tax earnings for the government but officials must not neglect landlords, who never pay their taxes."
He said many home and land owners ask buyers to declare a much smaller purchase price in order to pay lower real-estate taxes to the government.
Tenants also said that their landlords, to avoid paying rental taxes, do not register their houses to their local municipality.
"I have a contract with my landlord that is not registered with the municipality. That means he does not pay tax," said Iqbal Shareef, a Pakistani national working for a private company.
While it may be difficult to root out the smaller tax offenders, an official with an international auditing company official said the government should have an easier time finding corporate offenders.
"Most of the big companies survive on government contracts and it should not be difficult to go back to the account books to see what has been awarded to which company and do the math," said a KPMG auditor who asked to remain anonymous.