Muscat: Oman announced on Saturday that it will implement value-added tax (VAT) by the beginning of 2018 in a move to diversify its revenues amid the plunge in oil prices.

Oman will also raise the prices of various commodities, including those harmful to health such as alcohol, tobacco, ham and fizzy and energy drinks.

The draft law has been prepared and will be submitted to the legislative authorities for revision.

The tax will be officially approved next week and will begin to be implemented starting from 2017, according to Nasser Al Shukaili, secretary-general of Taxation at the Ministry of Finance.

Al Shukaili, told Oman News Agency (ONA), that levying VAT is the outcome of joint efforts between Oman and other GCC states.

He added that corporate income tax has boosted revenue over the past ten years. It has grown from 180 million riyals to 350.7 million riyals (Dh1.7 billion to Dh3.33 billion) in 2016.

He attributed the increase to the growing number of companies and foreign investment in the country.

Many companies started paying income tax after the expiry of their 10-year exemption period. He said the tax system will see several amendments in the near future.

The Ministry of Finance submitted an amended tax rate to Oman’s elected-Shura Council and State Council for consideration.

Since last year, Oman has been cutting state subsidies and introducing other austerity measures to curb a budget deficit that has totalled 4 billion riyals in the first seven months of 2016, up from a deficit of 2.39 billion riyals a year earlier.

The 2016 General Budget projects a 3.3 billion riyal deficit for 2016, which it says it will try to reduce by boosting non-oil revenues as well as cutting expenditures.

Oman posted a budget deficit of 4.5 billion riyals in 2015 as revenue declined by more than 50 per cent.