Muscat plans to implement income tax in 2022, according to its recently approved Medium-Term Fiscal Balance Plan for 2020-24.

The plan, which has been published in Arabic by the Finance Ministry, says the government is planning income tax for high-income earners.

“This initiative is still in the study stage, and all aspects related to the application of this tax are currently being studied. It is intended to implement this tax in 2022, and it is planned that the expected revenues from this tax will be directed to finance a number of social programmes,” the document said.

The document also said that income tax will help bring Oman’s budget deficit down to a sustainable level.

Sultan Haitham bin Tarik approved the Medium-Term Fiscal Balance Plan for 2020-24 on 22 October. The plan aims to lay the foundations for financial sustainability in the sultanate by enhancing efficiency, raising revenues and cutting debt.

Oman commits to development projects worth $965m

Oman has reduced its budgeted expenditure for the 2020 fiscal year by RO500m ($1.3bn) as it contends with the economic impact of lowered oil prices.

The sultanate originally estimated revenues of RO10.7bn and spending of RO13.2bn in its state budget, which would have led to a budgetary deficit of RO2.5bn.

The original state budget for 2020 was developed with oil prices estimated at $58 a barrel.

The Finance Ministry has also issued instructions to rationalise spending in government firms, including cuts of 10 per cent or more to operational budgets and rescheduling of project execution by advancing government priorities.

Muscat completes international bond issuance

Oman concluded a $2bn international bond issuance in late October as part of the government’s 2020 plan for deficit funding. The Finance Ministry said the bonds were issued in two tranches maturing in seven and 12 years.

Muscat raised more debt earlier this year. It concluded a local currency bond issuance valued at RO200m ($520m) in September. Those bonds carry an annual profit rate of 5.25 per cent for a period of six years and will be listed on the Muscat Securities Market (MSM).

Oman’s credit ratings have been lowered this year. Lower oil prices were the main factor in lowering Oman’s ratings as they will lead to a faster deterioration in the government's balance sheet, which has considerably weaker buffers than during the 2014-15 oil price shock.

This month's Oman special report includes:

> Comment: Oman heads into unchartered waters
> Government: Oman’s new sultan decentralises power
> Banking: Oman’s lenders delay the pain until 2021
> Upstream: Oman advances upstream sector with foreign help
> Downstream: Oman strengthens its downstream potential
> Utilities: Oman’s power and water sector at crossroads
> Construction: Oman construction shows tempered resilience
> Industry: Fiscal risks hurt Oman's industrial projects
> Databank: Oman heads for protracted recession