Oman 'to delay introduction of VAT'

Country will now impose a new tax on sugary drinks and tobacco products by mid-2018 rather than January 1, local media says

Of the six GCC countries, Saudi Arabia and the UAE look set to definitely implement VAT. Guiseppe Cacace/ AFP

Oman will delay the introduction of a 5 per cent value-added tax until 2019 instead of introducing it next year as planned, media reported on Monday.

The decision may hurt Oman's efforts to strengthen shaky state finances. All six countries in the GCC agreed to impose VAT at the start of 2018. While Saudi Arabia and the UAE are set to go ahead on January 1, other countries have been slow to make the required legislative and administrative preparations.

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To increase state revenues, which have been strained by years of low oil prices, Oman will impose a new tax on sugary drinks and tobacco products by mid-2018, the Times of Oman reported, quoting finance ministry sources. Some GCC members introduced such a tax this year.

The IMF has estimated a 5 per cent VAT in Oman could raise about 1.7 per cent of GDP, or around US$1.3 billion, for the government.

Earlier this month, Fitch Ratings cut Oman's credit rating by one notch to BBB-minus - just above junk - with a negative outlook, citing the country's big budget deficit, which it estimated at 12.8 per cent of GDP in 2017.

Standard & Poor's rates Omani debt as junk.

Oman's state budget deficit for the first 10 months of 2017 narrowed to 3.2bn Omani rials (Dh30.51bn) from 4.81bn rials a year earlier, according to finance ministry data.

Tax experts in the region believe Kuwait will also lag in introducing VAT, partly because of its slow-moving civil service and because its relatively independent parliament may want a say in the process.

Bahraini officials have said VAT is expected by mid-2018.