VAT TO SHORE UP OMAN’S ECONOMY
VAT will help the country fund its development and welfare expenses
MUSCAT: Economic analysts in Oman have welcomed the decision to impose Value Added Tax (VAT) in the Sultanate, as it will provide a permanent, reliable revenue stream for the government to maintain and develop infrastructure to benefit the people and economy.
The arrival of VAT was done through Royal Decree No. 121/2020, which concerns the promulgation of the Value Added Tax Law, which is to be published in the Official Gazette and enforced 180 days after its date of publication.
Bringing in VAT will help provide the country with the funds it needs to expand its economy and provide help to those who have been affected by the COVID-19 pandemic, said Dr Mohammed Al Wardi, an economic analyst in Oman.
“This is a critical time for Oman’s public and private sector, because of the coronavirus, and the decline in oil prices, which has affected spending capabilities,” he said. “This tax is imposed on every stage of the manufacturing and procurement process for a company, but it is not cumulative, so the consumer will only pay the final five percent of the tax rate.
“Manufacturers and merchants will be compensated for the tax for their goods they paid as VAT to their suppliers, also called input tax,” added Al Wardi. “For example, to make a bed, a carpenter will buy wood from a supplier, and pay five percent tax on it. When he sells this bed, the customer will pay him five percent VAT, which he will then send to the government, who will compensate him for the tax he pays to the agent.”
Plans to introduce VAT came after the signing of the Unified VAT Agreement which was agreed upon by Oman and the other five members of the GCC: Qatar, Saudi Arabia, the UAE, Bahrain and Kuwait. The agreement acts as a basis for domestic rules regarding VAT. However, small-scale enterprises will not be immediately affected by it.
“VAT will help supply the state treasury to meet its deficit and debt obligations, help diversify Oman’s income away from oil, and strengthen the Sultanate’s competitiveness levels and raise its sovereign rating,” said Al Wardi.
“This will also lead to reduction of unnecessary domestic consumption and a focus on exports, as these are not taxed under VAT.”