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VAT will not affect the common man, say tax experts

3 Apr 2021

In an effort to address the concerns of people on Value Added Tax (VAT), tax experts have said that the new tax that is coming into force in Oman on April 16 will not affect the common man as most essentials and daily-need items are either zero-rated or exempted. Oman will apply VAT of five per cent on most goods and services, with the exception of essential food items, healthcare, education and financial services. 

The introduction of VAT is also in line with the sultanate’s commitment to the Oman Vision 2040 programme, which aims to diversify the economy away from oil towards non-oil sectors such as logistics, manufacturing and tourism. Following the announcement on VAT, many members of the public reacted negatively saying it will affect common people. 

Shaddad al Musalmy spoke with tax experts who said that the rate in Oman is low compared to the rest of the world. 

 

Davis Kallukaran

Managing partner, Crowe Oman

Oman has one of the lowest rates of taxation at just five per cent. The beauty of Oman’s VAT regime is that it hardly affects the common man.

Oman joins a group of 166 countries out of 193 United Nations full member countries in the introduction of VAT. However, most food items, medicines, healthcare, education, financial service charges, local passenger transport, renting and sale of residential properties and more are either zero-rated or exempted. It is estimated that VAT will contribute about RO400mn to the tax revenue of the government which will in the long run wipe off the deficit and move the country to the comfort zone.

 

Paul Callaghan

Partner, Moore Oman

As basic foodstuffs, vital services and other necessities are to be zero-rated or exempted, there will not be much effect. Additionally, the rate is low at five per cent (other countries such as UK have 20 per cent VAT).

The other benefits, in addition to more revenue expected for the government, is that introduction of VAT is likely to be viewed positively by important organisations such as the IMF and World Bank, potentially facilitating them to provide more assistance to the sultanate.

Clearly, where VAT impacts adversely on social welfare households of citizens, the Oman authorities will seek to mitigate the effects on them directly.

 

Salah al Musallami

Audit executive director, Talal Abu Ghazaleh Global

The good thing is that all the essential goods and services are either zero-rated or exempted. All essential food items – as per a list published by ministry, 94 items – are zero-rated. Medical services, education, public transport, etc are exempted fully. And to promote industry and export, there is zero rate on export. 

Overall, there is not much impact of VAT on the general public, yet the government will generate extra revenue which will be used for infrastructure and development work.

I believe we all need to welcome this move for the future development of the country and public at large.

 

Ubaldo Tripoli

Partner, Kearney Middle East

The impact of introducing VAT in Oman is aligned with realising the sultanate’s strategy of achieving fiscal balance.

The increased government revenues from VAT can be reinvested, creating opportunities for infrastructural development and employment. This will result in economic growth, increased foreign direct investments and betterment in the welfare of citizens and residents.

Furthermore, the increased level of transparency it brings to the economy will boost competitiveness and strengthen growth strategies in corporate and government ventures. The benefits greatly outweigh the impact on purchasing power.

 

Shilpa Pawani

Head of Transaction Advisory Services, HC Shah Chartered Accountants

Oman has largely been an oil-based economy. However, due to global changes in the oil sector and mushrooming of alternate energy sources, there is a need to support the economy.

VAT is not new and uncommon. Many countries have implemented VAT to support their economies. 

Moreover, the rate of VAT in Oman is significantly lower or at par with other nations. Introduction of VAT has been carefully studied and implemented to ensure that necessities like healthcare, education and a wide range of everyday food requirements are either exempted or fall in zero per cent category.

 

Rajeev R Dubey

VAT expert, Talal Abu Ghazaleh Global

The rate of VAT in Oman is five per cent and some essential items are zero-rated. The government has announced 94 zero-rated items which is great relief for the general public.

Almost all essential goods are zero-rated and other essential services like medical, education, public transport, etc are exempted fully. Additionally, to promote export and boost business, there is zero VAT for export of goods and services. Overall, there will not be much impact on the public while the government will generate some extra revenue which will be used for overall infrastructure development. We should all welcome this for the economic growth of the country.

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