Dubai: The proposal for a two per cent levy on the billions of rials that expatriates send home every year has been approved by Oman’s Majlis Al Shura, or the lower house of the council of Oman, to overcome a budget deficit due to drop in oil prices, a media report said.
“The approval to tax expatriate remittances is one of the several steps proposed to overcome the budget deficit, which the sultanate will face while adjusting the oil price,” local media quoted Tawfiq Al Lawati, a Shura member, as saying on Sunday.
The move would hit 1.9 million expats, the report said, adding that it may drive an increase in black market money transfers.
“Every country has right to mobilise income for its development. We cannot say no to their plans. As majority of the expat workers belong to the low-income group, they should be exempted from tax,” Umesh Kumar, chairman of the Institute of Chartered Accountants of India’s Muscat Chapter, said.
The move comes as global oil prices have tumbled to a four-year low, with Brent crude, a benchmark for Middle Eastern oil, trading at $80 a barrel on Monday.
The Shura Council’s Economic and Finance committee made the recommendation in a report aimed at finding sources of income aside from oil, which accounts for the bulk of the government’s revenues. It also recommended that the forecast price of a barrel of oil in the 2015 budget be reduced from $85 to $80. Despite the revision, the budget is expected to face a deficit 500-700 million Omani riyals, Al Lawati told local media.
Expatriates remit approximately 3 billion Omani riyals every year, and a tax on the remittances is expected to bring in 62 million rials of revenue to the government.
The Shura council also recommended slashing the defence budget by five per cent, a rare move for a Gulf state. Gulf states are some of the highest per capita military spenders in the world. In 2013, Oman had the highest defence expenditure as a percentage of GDP in the Middle East, at 11.3 per cent, according to the Stockholm International Peace Research Institute (SIPRI).
London-based intelligence and defence consultancy IHS Janes noted in a report earlier this year that Oman and Saudi Arabia’s defence budgets had seen a growth of over 30 per cent between 2011 and 2013.
The Shura committee also recommended reducing spending on government projects by five per cent, revising the royalty fee on the trade of minerals from five per cent to 10 per cent, the introduction of duties on exports of liquid natural gas.
To lower expenditures, the committee also recommended reducing spending on oil production by five per cent and spending on gas by five per cent, among other recommendations.
— with inputs from IANS