“In France, we don’t have oil but we have ideas,” was a refrain during the first oil crisis in 1973. It is likely that at the same time, in the Gulf monarchies, people were saying: We have oil, it pollutes, but we don’t have income tax. There was no need to tax residents when hydrocarbon revenues filled the state coffers. But times have become tough for everyone. Even Oman has had to come to terms with taxing the wealthiest, becoming the first oil-rich country to take that step.
In a royal decree published Sunday, June 22, Sultan Haitham bin Tariq ratified the introduction of a 5% income tax starting in 2028 on Omanis earning more than 42,000 Omani rials (€94,400) per year. Deductions will apply for expenses related to primary residence, health, or charitable donations. According to the sultanate’s estimates, 99% of the population will not be affected by the new tax. Turning on the tax tap was seen as necessary to reduce the country’s extreme dependence on oil revenues. Fossil fuels account for 85% of the Omani state’s income, compared to an average of 60% for the region.
Diversifying the economy
The sustained drop in global crude oil prices – below $68 (€58.65) for North Sea Brent crude on Tuesday, amid hopes for a possible resolution of the Israel-Iran conflict – has weakened Gulf economies. “The average fiscal breakeven price for countries in the region (the oil price required to balance their budgets) has continued to rise in recent years. In 2024, it reached $83.20, an increase of $10 compared to 2020,” said Stéphane Alby, economist at BNP Paribas, in a recent study. As a result, “from a situation of near balance in 2023-2024, the combined budget balance of the Gulf countries will slip into deficit, with a shortfall expected to exceed 3% of GDP [gross domestic product] in 2025-2026.”
You have 25.91% of this article left to read. The rest is for subscribers only.
