Opinion Economy Oman’s planned income tax is an economic gamble High earning expats might be tempted to move to the sultanate's tax-free neighbours By Saleh Al-Shaibany August 13, 2024, 11:25 AM Alamy via Reuters The bustling Corniche in Muscat. Oman is poised to become the first GCC country to introduce personal income tax Oman’s proposed personal income tax may drive expatriate high earners to move to its tax-free neighbours and deprive the country of both the investment and expertise it needs to shift the economy into a higher gear. Parliament, the lower house, approved a draft income tax law last month. It is currently awaiting final approval by the State Council, the upper house, which is widely expected before the year is out. Under the provisions, expatriates in Oman are to be taxed at 9 percent on income exceeding $100,000, while Omani citizens will be taxed at a rate of 5 percent on earnings above $1 million per year. The sultanate is thus poised to be the first country among the Gulf Cooperation Council (GCC) countries to introduce personal income tax in an effort to boost income and diversify revenues. NewsletterGet the Best of AGBI delivered straight to your inbox every week But what will that mean for these high-earning foreign workers? There are 2.3 million expatriates in Oman and, according to Ministry of Finance statistics, about 15 percent of them make at least $100,000 a year. It will be a challenge for the country to retain highly-skilled workers in crucial professions like medicine, information technology and engineering or in financial-sector professions like banking and investment. And when it comes to the crunch, the private sector will be hit harder than the government. The majority of these high-earning expatriates work for private entities. For example, expatriates working in management positions in corporate companies typically earn an average of $150,000 a year. That is likely to lead to an exodus of crucial and experienced workers who support private-sector businesses and reduce levels of much-needed experience in the local economy. Oman will find itself competing with other GCC countries for skilled workers who are likely to move to find jobs in its tax-free neighbours. Social security is costing the government $1.4 billion per year, which is further emptying its coffers While the rationale for the introduction of income tax may appear encouraging, it is not likely to serve the country well in the long run while other GCC states remain tax-free. It is true that Oman’s economy is burdened with substantial public debt – currently at 14.5 billion rials ($37 billion) – which means that the ratio of debt to gross domestic product is about 35 percent. Also, to add to the financial squeeze Oman’s total state revenues fell by 7 percent in the first five months of 2024 to 5.075 billion rials ($13 billion) compared to the same period a year earlier. This is mainly due to the falling price of crude oil this year. Oman is producing only a little over 1 million barrels of crude oil per day. Oman adopts right approach to ambitious tourism targets Salalah must consider the locals in Oman’s tourist push Oman is on a steady path to a hydrogen-powered future To add to the financial woes gas revenues also fell in the first five months of 2024 by 24 percent to 763 million rials ($2 billion) compared to the same period in 2023. But falling revenues from essential commodities are not the only reason for Oman to introduce personal income tax. In January this year the country started paying monthly social security to the elderly, the disabled, widows, divorced women and children. It is costing the government 560 million rials ($1.4 billion) per year, which is further emptying its coffers. While all that seems justifiable, the big question remains. Can Oman keep its much needed experienced foreign workers while taxing them on their income to keep its economy rolling? Saleh Al-Shaibany is a journalist and lecturer, and CEO of AlSafa Press & Publishing