Oman’s new authority to foster efficient tax administration

The establishment of an independent Tax Authority with an integrated organisational structure bodes well for the growth of a robust, modern and efficient tax apparatus in the Sultanate, according to a well-known Muscat-based tax expert.

Ashok Hariharan (pictured), Partner and Head of Tax — KPMG Lower Gulf, said the revamped entity, established by Royal Decree 66/2019 last October, with its new organizational structured approved more recently by Royal Decree 42/2020, will also pave the way for a national tax administration modeled on the lines of modern tax entities in operation elsewhere around the world.

“The new Tax Authority has been granted autonomy and now reports directly to the Council of Ministers,” said Hariharan. “At the helm is a new Head of the rank of Minister and with the authority to issue regulations, policies and administrative decisions related to tax administration.”

Speaking to the Observer, he said the new entity effectively replaces the erstwhile Secretariat General of Taxation, which was part of the Ministry of Finance.  As an independent state institution in its own right, the Tax Authority will oversee the efficient administration and collection of tax revenues, which account for a significant share of the public purse.

Importantly, the new Tax Authority has been conceived to operate as a homogenous organization and not as a collection of departments each focused on specific taxes.

“One of the main features is that the Tax Authority will function seamlessly, instead of different departments for different taxes, say corporate tax, withholding tax, excise tax (introduced last year), and VAT, which could come next year. Rather, they will have tax directors responsible for a certain set of tax payers. That tax director will ensure compliance with the taxes – be it corporate tax, excise tax, or any other tax that may come in the future. So there is more coordinated information available to the assessing officers when they determine whether tax payers are in compliance. This enhances the efficiency of tax administration, as well as the prompt collection of taxes that are due.”

Furthermore, the establishment of the Tax Authority with a modern organizational structure also has beneficial implications for Oman’s aspirations to attract foreign investment, according to the tax professional.

“The issuance of Royal Decree 42/2020 and the By-Law echoes the Tax Authority’s autonomous status, established last year, and enables timely tax policy changes. In fact, after announcing the new tax structure in October 2019, Oman has signed the Automatic Exchange of Information. In November 2019, the Multilateral Convention (MLI) was also signed which supports implementation of tax-treaty related measures to prevent Base Erosion and Profit Shifting (BEPS). Both tax policy measures were ratified through issuance of respective RDs (34/2020 and 43/2020) on March 31, 2020. Given the pace of tax reforms, Oman may soon come out of the current EU blacklist, which is dampening foreign investments,” he added.