With production of less than 1 million b/d of oil, the Sultanate of Oman has less oil and gas reserves compared to its GCC neighbors, except Bahrain. Since the sharp drop in oil prices in the second half of 2014, the government has taken bold steps to increase revenues from non-oil sources.
These include turning to debt markets for the first time (it sold $2.5 billion in bonds on June 8) and taking on some reforms such as subsidy cuts, reduced benefits for public sector workers and increased fees. Furthermore, they introduced a royalty on telecom operators, a “fair tax” on Liquefied Natural Gas (LNG) exports, and an increase in royalties paid for mineral exploitation.
Oman has recently approved a 35 % tax on petrochemical firms and increased taxation on liquefied natural gas companies. The change will see taxes on LNG firms increase from 15 to 55%. Reforms in 2015 include the doubling of the price of gas for industrial users.
The World Bank estimates that $10 billion in revenues were lost in 2015, and the new budget projects a deficit of 16.8% of GDP in 2016.
Government subsidy spending is expected to fall by 64 % in 2016, as local fuel prices are brought in line with global prices. The deregulation of petrol prices began in mid-January 2016, with diesel and petrol prices increasing by up to 33%. An increase in the corporate income tax rate from 12 to 15%, as well as the removal of the tax exemption for the first OMR 30,000 of taxable earnings, has been approved by the Shura Council and a GCC-wide VAT has been agreed upon.
Other measures to boost non-hydrocarbon revenue include: revising electricity and water tariffs for commercial and industrial users; and increasing fees for government services including licenses and labor cards, vehicle registration, real-estate transactions and land allocation.