Oman to widen VAT exemptions, increase subsidies

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Oman plans to widen exemptions to a value-added tax (VAT) it will introduce this month and increase certain subsidies to mitigate the impact on citizens from the planned VAT, which is being introduced to help the Gulf state bolster its debt-burdened coffers.

Oman will raise the number of food commodities exempted from VAT to 488 from 93 and will raise the level of subsidies on fuel, electricity and water consumption for families receiving government financial support, the state-run Oman News Agency reported on Thursday.

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The measures, part of a package to assist families during the pandemic, also exempts low-income citizens from reimbursing housing loans given by the ministry of housing, it said.

Oman will start levying a 5 percent VAT on April 16 to ensure the sultanate’s financial sustainability after it accumulated huge amounts of debt over the past few years to compensate for lower oil income.

It will join Gulf neighbors Saudi Arabia, United Arab Emirates and Bahrain, which have implemented VAT in recent years to diversify state revenue.

The tax is one of a series of steps taken by Oman’s ruler, Sultan Haitham, to improve fiscal efficiency after sensitive reforms lagged for years under his predecessor, Sultan Qaboos, who died in January last year after half a century in power.

In a first among oil-rich Gulf states, the sultanate is also planning to introduce an income tax on high earners starting next year, as part of plans to bring down its deficit.

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Oman borrowed $1.56 billion from sovereign fund, $4.59 billion from other sources

Oman economy shrank 6.4 percent in 2020 due to COVID-19, low oil prices: IMF

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