Expect sales to peak as Oman gears up to implement VAT early next year

MUSCAT: Oman should get a welcome financial shot in the arm from a massive shopping splurge as residents snap up bargains ahead of Value Added Tax kicking in.

VAT at 5 per cent is expected to be imposed in Oman by early next year. It will effectively end tax free shopping in the Sultanate and add thousands to the cost of homes, cars and luxury items.

In other countries where the new tax was introduced, sales peaked in the months leading up to the introduction and slumped in the months immediately after.

Oman’s bargain hunters will be out in force throughout the second half of this year, according to experts and sales will peak around Christmas time.

“We can expect a massive hike in sales in December 2017, just before the implementation of VAT in Oman,” Nick Giannopoulos, VAT Director at PwC, said.

“Retailers are expected to come up with special promotions and offers to increase their sales during the final quarter of 2017 as they would be unable to find buyers for the same products easily once these are taxed. Also, consumers of particularly expensive products like cars and televisions are likely to upgrade their assets tax free,” he explained. Oman is expected to levy a 5 per cent VAT on retail purchases, car sales and rentals, hotels and restaurants, repair and maintenance while exempting or zero-rating the tax for essentials like food, medical supplies and education.

Though its rate will be low, VAT is expected to drive inflation by around 2.5 per cent with retailers expecting buyers to avoid unnecessary sales immediately after its implementation as people will stock up before it comes into place.

Tax evasion

According to Justin Whitehouse, Indirect Tax Leader at Deloitte Middle East, as the deadline for implementation approaches, consumers will consider buying large items early to evade tax.

“It is reasonable to expect de- Value Added Tax is expected to be levied on retail purchases, car sales and rentals, hotels and restaurants, repair and maintenance while exempting or zero-rating the tax for essentials like food, medical supplies and education. mand to peak towards the end of 2017, assuming a January 2018 implementation date, for things like cars, household appliances etc. Likewise, consumers may even choose to shop early for smaller items, particularly in the days leading up to its implementation. Businesses will need to consider the implications of these changes in demand in areas like stocking, staffing and even their relationships with finance businesses,” said Justin Whitehouse.