Announcement on personal income tax welcomed

The business community in the Sultanate of Oman welcomed the announcement by the government that it has no plans to introduce personal income tax in its 2022 State Budget

Corporates who spoke to the Observer expressed their relief, with one businessman saying: "We are on the path of recovery, having survived pandemic impacts that nearly drove us out of business."

"We are grateful to the country and the government as it has decided not to proceed with the proposed personal income tax in 2022 as we barely managed to stay afloat during the Covid-19 which hit us to the core," said Mohammed Ashraf Omar, an investor who runs many business entities.

The move was first announced in November 2020 as part of a broader medium term fiscal plan by the government to tackle a budget deficit in the wake of the low oil prices and the coronavirus pandemic.

Speaking to the Observer, Alkesh Joshi, Partner, Ernst & Young, said the announcement is a positive step as the country is looking to attract foreign direct investment and talent to come and help in nation-building activity.

"Also, Introducing the personal income tax at the moment would have reduced the purchasing power of the people. But if this initiative becomes a GCC-wide initiative where all six six Gulf countries come together to introduce simultaneously, it will be more acceptable from the private sector perspective to attract foreign direct investment and talents," said Joshi.

"The Introduction of personal income tax was announced as part of the Medium Term Fiscal Plan announced when the priority was fiscal consolidation and every possible source of revenue would have been welcomed by the government.".

However, he feels that the introduction of personal income tax would require careful impact assessment on businesses, as well as extensive interaction with corporates as well, so that the businesses are prepared to welcome the tax system.

"The corporates would like to see more interactions as to how the law will look like and how the overall impact on the society will be because the implementation will be expected to be carried out by the businesses as there is going to be tax deducted at the source for salaried employees. And their engagement is going to be crucial as this will impact everybody similar to VAT introduced this year," adds Alkesh.