Oman denies plans for Gulf-funded multi-billion dollar deposit

Reuters reported yesterday that the country was seeking to boost its foreign exchange reserves to protect its currency

Oman could become the first country in the Gulf Cooperation Council to introduce value added tax as it looks to raise revenues, according to reports. Oman Daily Observer cites an official familiar with the matter as saying the “final touches” are being made to the country’s draft law relating to VAT. “It is only a matter of timing,” he said, without specifying the tax rate. "There will be no exemptions, and all consumers will pay the VAT upon its implementation," he said, adding, "key sectors, sectors such as health, education and social services may not be included in the new tax net". The source said around 94 food items would also be exempt and the country expected to raise OMR 300m ($779m) each year from the levy for state coffers. However, he ruled out any plans to introduce income tax in the country, according to the publication. A GCC-wide agreement to implement a VAT rate of 5 per cent is in the works with the UAE already confirming its plans. Last month, the emirates said it would implement the levy from January 1 2018. Under the agreement, UAE minister of state for financial affairs Obaid Humaid Al Tayer said other countries in the region would have until January 1 2019 to follow suit. He said at least 100 foot items, bicycles, healthcare and education would be exempt from VAT, which is expected to raise Dhs 12bn ($3.2bn) for the country in its first year. In a report this month, consultancy firm EY’s MENA indirect tax leader Finbarr Sexton said VAT would have a “broad impact” on businesses in the region. “It will diversify government revenue sources and reduce reliance on oil revenues to finance government expenditures,” he said. “The additional revenues collected are likely to fund programmes for the development of job opportunities for nationals and improve education and healthcare in the GCC.” But he warned that there would be severe penalties for non-compliance. “All businesses must undertake a review of their current contracts to determine if VAT has been appropriately addressed,” he said. The implementation of VAT in the GCC is being driven by a prolonged decline in Brent crude prices from a $115-per-barrel peak in mid-2014 to around $40 this month. GCC countries are expected to post average fiscal deficits of 16 per cent this year, with a $275bn regional shortfall, according to the International Monetary Fund. Related articles VAT could become additional cost for GCC businesses Industry GCC Rail Completion Date Could Be Pushed To 2020 - UAE Minister Industry UAE Launches Strategy To Become Most Innovative Country In Seven Years Industry Newsletter Subscribe to get a Gulf Business update each day. By Robert Anderson Email Robert Latest More senior executives at Abu Dhabi bank FGB depart Emirates would buy more A380s even if new version shelved Saudi Aramco prepares for global expansion as IPO looms UAE workers say CEOs accountable for data breaches

Oman has denied reports that it is negotiating with Gulf state to secure a multi-billion dollar deposit for its central bank.

Reuters reported yesterday that Omani officials had met with the finance ministries of Kuwait, Qatar and Saudi Arabia to discuss the proposed deposit, citing two sources.

Read: Oman in talks with GCC states for multi-billion dollar deposit

But the country’s Ministry of Finance dismissed the news in a statement.

“The sultanate dismissed the news circulated by media that it is negotiating with Gulf Arab states to secure a multi-billion-dollar deposit in its central bank that would boost its foreign exchange reserves and head off any pressure on the Riyal,” it said.

The ministry further denied any negotiations had taken place, adding that its currency was not at risk and it had enough reserves.

Oman has been hit harder than most Gulf state by the decrease in oil prices since the summer of 2014.

This month the country announced a projected budget deficit of OMR3bn ($7.79bn) for 2017 following a projected OMR3.3bn deficit for the previous year.

The country said it would change taxes, raise electricity tariffs, increase fees and sell stakes in companies to boost revenues.

Read: Oman 2017 budget projects smaller deficit as govt plans tax hikes

The Omani rial has depreciated in the forwards market since early 2015 as some banks have hedged against the risk of a devaluation, although the currency is now far from lows seen in 2016.

Comments

comments