Oman to impose new excise tax this month to boost revenues

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Oman will impose a new tax on sugary drinks and tobacco products starting on June 15, as the small Gulf oil producer seeks to boost state revenues strained by years of low oil prices.

A 100% excise tax will be introduced for tobacco products, energy drinks, alcohol and pork meat, while a 50% tax will be applied on carbonated drinks, according to a statement from an official at the Secretariat General for Taxation published by Oman’s state news agency on Saturday.

“The excise tax is a consumption tax and is considered to be indirect taxes. 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,” said Sulaiman bin Salim al-A’adi, director general of survey and tax agreements.

Oman has been slow in implementing fiscal reforms aimed at limiting the widening of its budget deficit, while it has increasingly relied on external funding - through bonds and loans - to refill its coffers.

The sultanate had originally planned to introduce a 5% value-added tax in 2018, which is now expected to start in 2020.

“Further delays in implementation, along with a scenario of lower oil prices, pose downside risks to our assumption of narrower fiscal deficits relative to 2015-2017,” S&P Global Ratings said in April, adding that it expected fiscal gains in 2019 coming from the implementation of excise taxes on tobacco and energy drinks.

Oman said at the start of the year it expected its budget deficit to be 2.8 billion rials ($7.27 billion) this year, or 9% of gross domestic product.

Sources told Reuters last month that to cover part of the deficit, Oman is expected to issue a new international bond soon in a deal likely to go up to $2 billion in size.

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