The six GCC states agreed to introduce five per cent value-added tax (VAT) in 2018 after a slump in oil prices hit their revenues, but the Sultanate, whose financial position is the weakest of the group, delayed its tax to 2019.
Wednesday 31, July 2019 BY KUDAKWASHE MUZORIWA
Oman is considering introducing VAT in 2021, further delaying a fiscal consolidation measure that economists say could be politically sensitive at a time of sluggish growth and high unemployment, reported Reuters.
The three major rating agencies—Moody’s, Fitch and S&P Global Ratings—said that they expected the Sultanate, rated junk by all three major rating agencies, to introduce VAT in 2020.
Oman said that it would increase its revenue base by introducing VAT which the government expected to be implemented in 2021, according to a bond prospectus distributed to investors earlier in July 2019.
Despite its access to markets, Oman’s fiscal position remains weak and S&P estimated the fiscal deficit to reach 10.6 per cent of gross domestic product this year from 8.9 per cent last year.
Analysts said that delays beyond 2020 in implementing VAT, combined with lower oil prices and production cuts implemented by OPEC posed downside risks to its assumption of smaller deficits compared with 2015-2017.
Additionally, the International Monetary Fund this month encouraged Oman to work harder on fiscal reforms, including expediting VAT and measures to adjust government expenditure.