Tax-Free No More! Why Is Oman Breaking The Gulf's No-Tax Tradition With Its 2028 Income Levy Plan?

Breaking the Gulf's no-tax tradition, Oman, has finally announced the introduction of personal income tax for its citizens from 2028. The Arab nation has announced the imposition of personal income tax is likely to boost Oman's broader Vision 2040 project.

For years, the approach of not having an income tax for its citizen has attracted a large population of migrant workers to Arab nations like Oman. The no-personal income tax rule for people has also helped in boosting nation's economy with enhanced consumption, savings and investment.

Why Is Oman Breaking No-Tax Tradition?

The imposition of tax on high net worth individuals is Oman's first step to reduce its reliance on hydrocarbons and fuels. According to news agency AFP, the approach of not having an income tax is part of a broader push to move the sultanate's economy away from reliance on hydrocarbons. The new personal income tax will be imposed only on the top 1% of earners in Oman, reported AFP citing Oman's plan issued by royal decree on Sunday.

When Will Income Tax Payment Begins in Oman?

Oman's income tax rule will come into effect from 2028, however, there is no official announcement regarding the exact date of the implementation of the rule. As per the order, Oman citizens who are among the top 1% earners of the country, will be required to pay 5% tax of their income. The tax will be imposed only on those who make upward of $109,000 annually, ie they are the top 1% of earners in Oman.

Will Other Gulf Nations Follow The Suit?

The International Monetary Fund (IMF) has earlier predicted that Gulf states are required to impose new taxes in the coming years to diversify government revenues. Despite the IMF's intimation, it is still unclear whether Oman's announcement to impose personal income tax in future will inspire other nations in the region to follow the suit or not.

Oman Introduces Income Tax: Will It Benefit The Nation?

While introduction of the income tax may act as a deterrent for people who are planning to migrate to Oman. But for Oman, the introduction of the income tax "will further prioritise financial stability by diversifying revenue sources" that will help shelter the country from "fluctuations" in the global energy market, according to Minister of Economy Said bin Mohammed Al-Saqri.

Al-Saqri has also added that the oil and gase revenue consist of 85% of the nation's public income, depending on the market price of the fuel.

"The tax serves as a new revenue stream to diversify public income sources and mitigate risks associated with reliance on oil as the primary revenue source," Al-Saqri said.

The announcement of personal income tax has come after years of consideration and planning to assess the impact of the decision its repercussions. While the country is planning to build another source of revenue other than oil and fuel, it is also working to shift Oman's dependency from oil by favouring other economic activities.

The country in 2020, rolled out a program to cut down public debt and boost economic development. The move has been considered a part of Oman's wider planto turn it into a technology-based economy.