Oman is set to implement a personal income tax as part of its strategy to reduce the nation’s dependency on hydrocarbons and diversify its economy. This initiative marks a significant change within the Gulf Cooperation Council, a group of six oil-rich member states where such a tax is unprecedented. Starting in 2028, the tax of 5% will be levied on individuals earning more than $109,000 annually, targeting the wealthiest 1% of Oman’s population. This development was announced through a royal decree and reported by the Oman News Agency.
There is currently no indication of whether this move will influence other Gulf nations to adopt similar measures. Nonetheless, the International Monetary Fund has indicated that new forms of taxation might be necessary in the Gulf regions to broaden government revenue channels. Previously, the absence of income tax in the Gulf has facilitated economic growth by attracting expatriates and foreign labor.
The introduction of the income tax in Oman is envisioned as a crucial step towards fostering financial stability by creating diversified revenue streams. This will help shield the economy from the instabilities of the international energy market, as articulated by Said bin Mohammed Al-Saqri, the Omani Minister of Economy. He noted that the nation’s reliance on oil and gas can constitute as much as 85% of its public income, highlighting the vulnerability due to market volatility.
Al-Saqri emphasized that the new tax is designed to serve as a fresh revenue source, diversifying the public income and reducing the potential risks associated with dependence on oil as the primary income stream. Oman has been deliberating over the introduction of a personal income tax for some time. The decision aligns with other recent fiscal reforms aimed at reducing public debt and fostering economic growth, initiated in 2020.
This taxation move forms part of the broader Vision 2040 strategy, which aims to transform Oman into a technology-centric economy. The Vision 2040 project underscores the country’s aspiration to build a more resilient, technologically advanced economic landscape for the future.