Falling oil prices – which currently sit 20% lower than their high earlier on in 2014 – are a major cause for concern for a country in which oil makes up the vast majority of exports. In the absence of a considerable rebound in the near future, the public purse is likely to start feeling the strain in Oman shortly.
As a result of this potential shortfall new revenue-generation models are being considered, particularly in relation to new sources of taxation. For some reason telecommunications companies have been the first to come under scrutiny, where a proposed 12% tax is under discussion. While such a tax would raise millions of dollars, it is still a long way off plugging the assumed gap in next year’s budget.
Another suggestion being considered by the Oman government involves increased taxation on mineral extraction and sales, and perhaps even related imports.
However possibly the most concerning avenue of all for expats currently being considered is a levy on all overseas financial transfers. Like most of the Gulf States, Oman is a popular expat destination. Its active petrochemical and construction industries provide vast wealth not to mention opportunities for skilled overseas workers.
Just over a million expat workers may now be found in Oman, making the most of the opportunities on offer to earn a reasonable wage. In many cases expats then send a percentage of the money they earn to relatives living in other countries. For many people in less developed nations, these transfers from relatives living and working overseas can be their only source of income.
Now, the government is seeking to take advantage of this flow of cash exiting the country day by day, by placing a tax on funds transferred out of the Kingdom. While the exact rate of the tax is not yet clear, it has been suggested by economists in the know that this tax could generate $160 million per year for the State, more than enough to plug any gaps in their finances, especially in conjunction with other austerity measures under discussion.
There are, of course, risks. While some expat workers will now doubt be obliged to pay these taxes, there are expats who are already getting itchy feet and considering a move to one of the other gulf nations, where their income won’t be taxed in this manner. As a risk there is a risk for Oman in that they may lose both experienced expat workers – and hence the value they bring to the economy – if the financial constraints become too odious.
It should also be mentioned that in cases where this money being transferred to family in developing nations in their only source of income, this form of taxation may also have a negative effect in those living in foreign countries. A tax on remittances sent overseas would by default mean less money reaches its chosen destination, and in turn, financial hardships for family that rely on this income to survive.
Whatever the case, all of the above are currently only suggestions being considered. If you are an Omani expat you might want to dig deeper into the potential outcomes of these moves to ensure you are suitably armed with information well in advance of any changes occurring.