Wednesday, October 27, 2021 | Rabi' al-awwal 20, 1443 H
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Medium-term fiscal plan to enhance social safety net

The Sultanate’s medium-term fiscal plan, unveiled in line with Vision 2040, aims to build an integrated national social safety net to protect low-income and social security families.

“The reform package should work to ensure social protection for vulnerable populations and promote intergenerational fairness so future generations of Omanis can benefit from the country’s natural and financial wealth”, urges the blueprint for the ambitious four-year plan.

Along with a number of new measures, the medium-term fiscal plan, approved by His Majesty Sultan Haitham bin Tarik, commits to bring in reforms in different sectors.

In this regard, the Royal orders include implementation of a number of developmental projects to the tune of RO 371 million in different governorates.

The plan aims to better define what constitutes a vulnerable population in order to improve programme coverage, strengthen the targeting of benefits to vulnerable populations, and increase the adequacy of the financial benefits provided.

“Ensuring social protection is not just the responsibility of initiatives focused on reforming the social safety net; rather, all initiatives have this obligation”, it says.

“May it be zero-rating essential food-stuffs and households good in the value-added tax (VAT) or structuring electricity tariffs in a way that gives preference to the primary households of Omani families, all initiatives must do their part to promote social equity and ensure support for Oman’s most vulnerable.

A socioeconomic impact assessment has been carried out by an independent, third-party to assess the fiscal, social and economic impact of VAT in Oman.

“This assessment has allowed the government to carefully design a VAT regime that takes into account the unique social context of the Sultanate”, it said.

Over 90 basic goods have been zero-rated in VAT to ensure Omani households do not see higher prices in food and other household essentials. The government has also chosen to exempt healthcare, education and residential rents from the VAT system — meaning these critical services will not fall under VAT.

The government recognises adjustments to the revenue-raising framework alone are not enough. It is also pursuing a range of cost containment and expenditure optimisation initiatives. All public, either citizens or expats, companies and financially capable people, benefit from the subsidized services.

“Redesigning subsidies and the social safety net are critical components to helping contain future expenditure growth and capture savings opportunities. This initiative intends to reallocate the subsidy to the vulnerable and people who deserve it by gradually increasing the electricity and water tariffs and ensuring that support is provided for vulnerable populations”, it adds.

Currently the government subsidies to public services account to approximately RO 1 billion.

Additional refund mechanisms are also being considered where appropriate to achieve other social objectives.

A particular focus has been placed on ensuring that short-term support mechanisms are developed to offset water and electricity subsidy reforms while also developing a longer-term strategy to holistically rationalize and strengthen the entire social safety net system.

The plan also envisages review of the laws and legislation that will help to raise the living standards of Omanis and ensure that companies will employ Omanis.

As part of the process, the Ministry of Labour is reviewing the policies and rates Omanisation has imposed on various sectors by making Omanisation targets more flexible.

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