The Role of Taxation in Revenue Generation and Economic Development in Oman

This research project investigates the impact of personal income tax on revenue generation in Oman and its role in economic development. The findings show that personal income tax is effective in increasing government revenue. The study explores the difference between tax and income capital, the purposes of taxation in Oman, and analyzes the income tax and revenue generation. It also examines the significance of taxation and the Royal Decree governing taxation in Oman.

The Role of Taxation in Revenue Generation and Economic Development in Oman
Name of the student
Name of the university
Author note

Taxation Law in Oman
Dedication
The research work is dedicated to my professor who has helped me in completing the
research paper.
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Acknowledgment
I am privileged to show my deepest gratitude to my Professor who have known to
continuously support me with all my work and also provided a spirit of zeal with respect to
the scholarship and research. Without his advice and relentless, this specific research would
not have been complete.
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Taxation Law in Oman
Abstract
The main intention of this project is investigating the effect of the personal income tax
on the revenue generation of the government in Oman. The income tax has known to
contribute highly to the increase in the revenue base of the government. The summary of the
findings have showed that personal income tax is quite effective for the revenue formation of
the government. Chapter one states the introduction of the taxation in Oman, it also states
aims and objectives of study along with the significance of the study. The next chapter states
the difference between tax and income capital. It also states the purposes of taxation in
Oman. The other chapters states the significance of taxation and analyzes the income tax and
revenue generation in Oman. The last chapter states the ROYAL Decree which is known to
govern taxation in Oman.
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Taxation Law in Oman
The declaration
I hereby, declare that this research work titled “The role of taxation in revenue
generation and economic development of Oman” is a product of my research effort. No
part of this particular work had been previously presented to any institution an all the
consulted authorities have been acknowledged in the reference.
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Taxation Law in Oman
Table of Contents
CHAPTER ONE........................................................................................................................9
GENERAL INTRODUCTION..................................................................................................9
Background of the Study........................................................................................................9
Statement of Problem.............................................................................................................9
Scope of the study..................................................................................................................9
Aims and objective.................................................................................................................9
Significance of the Study.....................................................................................................10
Research Methodology.........................................................................................................10
Literature Review.................................................................................................................10
Organizational layout...............................................................................................................13
CHAPTER TWO.....................................................................................................................14
Description of taxation in Oman..............................................................................................14
Brief History of Income Taxation in Oman.........................................................................14
Definition of Tax..................................................................................................................14
Definition of Income............................................................................................................15
Distinction between “Income” and “Capital”......................................................................15
Definition of Income for Tax Purpose.................................................................................16
Purpose and Function of Taxation.......................................................................................16
Imposition of Taxation in Oman..........................................................................................17
Comparison of tax laws in Oman and UAE, Oman and the United States of America.......17
CHAPTER THREE..................................................................................................................18
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ANALYSIS OF INCOME TAX AND REVENUE GENERATION IN OMAN...................18
Income Tax and Revenue Generation in Oman...................................................................18
Role of Taxation in the economic Development of Oman..................................................18
Raising of Revenue for Government Services in Oman......................................................19
Economic Revitalization......................................................................................................19
Distribution of Income.........................................................................................................20
CHAPTER FOUR....................................................................................................................21
SIGNIFICANCE OF TAXATION IN OMAN........................................................................21
Omani Economic situation...................................................................................................21
Taxation as an equipment for Economic Development.......................................................21
Tax as incentive for Economic Growth...............................................................................22
Effects of Fiscal Policies on Economic Development.........................................................22
CHAPTER FIVE......................................................................................................................23
ROYAL DECREE THAT GOVERN TAXTION IN OMAN.................................................23
Income tax law in Oman......................................................................................................23
Withholding Tax..................................................................................................................23
Taxation for Islamic Finance...............................................................................................24
Tax card................................................................................................................................24
Penalties...............................................................................................................................25
CHAPTER SIX........................................................................................................................25
SUMMARY, FINDINGS AND RECOMMENDATIONS.....................................................25
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Summary..............................................................................................................................25
Findings................................................................................................................................26
Recommendations................................................................................................................26
Reference list and bibliography...............................................................................................27
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CHAPTER ONE
GENERAL INTRODUCTION
Background of the Study
Taxes have known to be the bedrock of the revenue generation for any government.
Taxes are known to be incurred in most of the nations of the world in order to increase the
revenue for the state. Taxes are therefore said to be one of the most key sources of the
revenue for the government as they disclosure a common obligation of the taxpaying
individuals. The personal income tax is one of the important parts of Oman. There have been
also major changes to the corporate income tax in case of Oman. The head of the state is also
known to issue Royal Decree which is known to come into immediate effect.
Statement of Problem
The problems of personal income tax on the revenue generation of the government are
known to be a global phenomenon. However, in a country like Oman the problems generally
take place because of lack of qualified personnel, insufficient working facilities and also due
to corrupt practices of the tax administration.
Scope of the study
The objective of the research is to describe the taxation in Oman, analyzing the
income tax and revenue generation of Oman, significance of taxation and the Royal Decree
which govern taxation in Oman
Aims and objective
The objective of the study is to find
1. Nature of the personal income tax which is used for revenue generation.
2. Function and purpose of taxation.
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3. Role of Taxation in the economic Development of Oman
4. How tax acts as an incentive for economic growth.
Significance of the Study
The research of this kind is known to be quite important to the public. This study
therefore will be great benefit to many people since it will be helping the government for
evaluation of the performance of the personal income tax on the revenue generation and for
the contribution of economic development. The study will also serve as a source for further
research.
Research Methodology
The methodology that is used in the paper is from the secondary sources. The sources
include magazines, articles and textbooks. The various taxes of Oman have been obtained
from the websites.
Literature Review
This part of the paper intends on to review on the various works on the personal
income tax on the generation of income such as the nature of the personal income tax on the
revenue generated, problems of personal income tax on revenue generation, relief and
allowance available under the personal income tax on the revenue generation rate structure.
All the above concepts will be looked into details based on the works of others along with the
academic scholars.
Vito Tanzi in his paper “The Role of Taxation in the Development of East Asian
Economies” states the role of taxation in the Asian countries. The paper also states how
income tax helps in revenue generation.
It has been found out that personal income tax on the revenue generation had been
quite unsatisfactory and problematic in some parts of the country. Tax revenues and structure
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are significantly linked with the economic growth. At the time of last decade, it has been
found out that there is a presence of association between the taxation and the growth of the
economy(Al‐Mataani, Wainwright &Demirel,2017). There is also presence of some link
between the taxes and the economic growth and presence of significant evidence present
between the taxes and economic growth which have been focused on the level of the taxation.
Timothy Besley in his book in his journal article “Why do developing countries tax so
little?” states that low income countries are known to collect tax of only between 10 percent
to 20 percent of the gross domestic product. On the other hand the high income countries are
known to tax more than forty percent of the gross domestic product. It have been also found
out that for the present low earning nations, the issue of increase in the tax revenue is known
to be is known to be a huge problems than having the correct sort of technical skills. Taxation
can therefore be stated as the building of the coercive authority of the government. The state
that fails in increasing the profits in the GDP is even fails to defend the rights of property in
an effective manner. The paper states that taxation is known as the “rule reliant form of
revenue extraction which will be suiting the market company. The government who want to
tax will also be building institutions that will be supporting the formal markets. Taxation
have also known to play a pivotal role in the enhancement of the states.
Monkam in his paper “How property tax would benefit Africa” states the
development benefits which government gains by taxing the citizens. The taxation is also
known to play a critical role in building the state. For successfully managing the tax regime,
the government should be developing effective bureaucracies.
COWELL in his journal unwillingness to pay states about the tax evasion. It also
states about the attributes of a good taxation system. The journal have stated that a good
taxation system is known to be based on various principles. One such principle is the
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simplicity principle. A good taxation should be based on the simplicity principle. The tax
system along with the tax laws should be simpler, adjustable and flexible in nature.
Calvin A. Ken in his paper “principles of good taxation” has stated the main attributes
of the tax system. It should be simple and also well understood why both the tax payers as
well as tax administrators. The second one is the efficacy principle. The tax system should be
advocating the ethics of transparency, probity, efficiency and professionalism in the tax
collection (Young, 2018). The third principle is the economy principle which states tax
system should be making the economic situation better off instead of making the situation
worse off. It should not be adversely affecting the economic contribution of the tax payer.
The administrative cost to the governments should not be negatively affecting the national
output of the taxes collected. The next comes the Equity principle where it states that the tax
should not be arbitrary nor the amount payable should affect the personal feelings. People
should be paying taxes according to their abilities to pay. The certainty principle states that
the time of payment, the manner of payment and the amount which needs to be paid should
be clear to the tax payers along with the taxing authorities. The convenience principle relates
specifically to the mode and the timing of the payment. This particular principle is known to
stipulate the time and the manner of payments should be convenient to the tax payer
(Mohammed & Uddin, 2017). The productivity and the sufficiency principle states that a
good tax system should be able to produce a huge amount of revenue. A good taxation
system should also be free from any kind of partiality.
Young Lee in his research paper “Tax structure and economic growth” have predicted
in that high amount of corporate tax rate is known to reduce the rates of the economic growth.
The tax policies are known to affect the growth rate of the country. The paper shows how the
changes in tax policy are used for generating changes in the equilibrium values. It states that
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tax effects on the investment in human capital are known to be more complicated in nature. It
have been found that the tax is negatively correlated with the growth of the economy. The
growth effect of the tax reform is known to effect in astatic context. The paper has also
shown that the corporate tax known to have affected personal income tax. The direct policies
such as the research and development are used for stimulating the innovation. The corporate
tax is also known to vary greatly over time. The average corporate tax has been found to be
dropped from 40 percent to 30 percent.
Ghassan Omet in his paper “The Capital Structure Choice in Tax Contrasting
Environments: Evidence from the Jordanian, Kuwaiti, Omani and Saudi Corporate Sectors”
in his paper states the nature and determinants of the capital structure choice of Kuwati,
Oman and Saudi Arbian non financial listed companies. The paper also shows that the
Jordian companies are known to have the lowest mean value of the long term debt which
indicate the financing decisions of Omani and Kuwati.
Organizational layout
The first chapter consists of the background of the problem, significance of the
research, scope of the paper, aims and objectives and the literature review. The second
chapter consists of the history of income taxation in Oman, purpose of taxation and
imposition of taxation in Oman (Al‐Mataani, Wainwright & Demirel, 2017). Chapter three
states the analysis of the income tax and revenue generation in Oman. Chapter four states the
significance of taxation and it also states how tax acts an incentive for the economic growth
and the chapter five comprises of the Royal Decree that is known to govern taxation in
Oman.
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CHAPTER TWO
Description of taxation in Oman
Brief History of Income Taxation in Oman
During the year 1971, Law of Income Tax had been first issued in the Oman
Sultanate. After that the Income Tax Law for companies had been issued by Royal Decree in
the year 1981 in order to replace the previous income Tax law. Royal Decree No. 77/89 had
published the Law of Profit Tax in the year 1989 for imposing tax on the establishments that
is usually owned by the people (Radon & Logan, 2016, December). Although it have been
effectively implemented after 1994. The law was also restricted to the commercial and
industrial establishments. Kuwait has known to introduce corporate tax in the year 1955. On
the other hand, Saudi Arabia had introduced income tax on the foreigners in the year 1975.
The income tax however, has been suspended because of the oil revenues and for the need to
recruit huge number of foreign workers. However, in the year 1988, Saudi government has
known to reintroduce income tax on the foreign workers in order to offset the decline in the
oil revenues. In the 1990s, the ministers of the gulf countries have known to study the
feasibility of introducing value added tax as well corporate tax. In 1994, Oman has known to
reintroduce the corporate tax.
Definition of Tax
Tax is the mandatory payment towards the proceeds of the government which is
incurred by the state on the earnings of the workers and the profits of the business and also
added in to the cost of goods, transactions and various services. Therefore, taxis the amount
of money which the citizens pay to the government so that it can be paid for the public
services. When an individual or the company is taxed, they need to pay a part of the income
to the respective government. in the same way when the goods are taxed, a percentage of the
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prices are to be paid to the government. there is a presence of very little taxation imposed on
the residents of Oman which is one of the Gulf States(Mohammed & Uddin, 2017). Tax can
also be stated as the mandatory financial charge which is generally imposed on the taxpayer
by the government so that they can fund various public expenditures. Taxes can be either
direct or indirect taxes.
Definition of Income
The income is the earnings attained on an ordinary basis for services and by
undertaking investments. Income is the sum of money which the people or the business gains
for the purpose of providing a good or services by investing money. Income is also utilized
for funding the expenditures occurring on a day to day basis. Pensions, social security and
investments are some of the main source of incomes in case of the retirees. However, in case
of business income is referred to the revenue of the company after the payment of the taxes
and expenses. Therefore, income can be referred to as the earnings. Income is also subject to
taxation. People can receive earnings by gaining wages and undertaking investments within
the capital assets such as stocks, real estate and bonds. The revenue which is generated by the
income taxes is known to finance the actions of the government and programs which is
determined by the federal, as well as the state budgets.
Distinction between “Income” and “Capital”
The main dissimilarity between the capital and the income is the cause of the revenue.
Capital is referred to the primary amount that has invested. Therefore, capital gain is known
as the profit that is attained when the investment value goes up. On the other hand, income is
the interest or the dividends earned. The amount that is returned in case of investment is not
dependent on the capital expenditure unlike the capital gains. One of the main difference
between the capital and investment is that the rates at which they are taxed. The rates of the
taxation depend on the investment type and also the length of time at which an investment is
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held (Ahmad & Masan, 2015). Capital is the form of asset which can enhance the power of
the person for performing any kind of useful work economically. On the other hand, income
is the total sum of money gained on a customary basis for service or via investments.
Definition of Income for Tax Purpose
Income for tax purpose is the sum of income which is used to evaluate the amount of
tax an individual or any organization is liable to pay the government in any given financial
year. The taxable Income is also sometimes termed as the gross earnings or the adjusted gross
earnings. Income for tax purposes is also known as the taxable income. It is therefore, the
value of income which is used for calculating the amount of tax an entity or the organization
is liable to pay to the government in the specified financial year. It comprises of the wages,
salaries, bonuses, unearned income along with investment income. The income for the tax
purposes also consists of the earnings that are created from the assets that have been
appreciated, which have been sold out and even capitalized during the year from the
dividends and the interest income.
Purpose and Function of Taxation
Purpose:
Taxation is known to be the mean by which the government finances their expenses
for the citizens of the country. One of the main purposes of the taxation is accumulation of
funds for the functioning of the government machineries (Taiwo, Falohun & Agwu, 2016).
One of the most important purposes of the taxation is raising the revenue in order to meet the
huge public expenditure. Most of the activities of the government should be financed by
taxation. It is known that taxation policy also includes some of the non-revenue objectives as
well. In the current world, the taxation is used for economic policy.
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Function
Tax is known to quite important for the society as well as for the economy. It is
known to fund the hospital, transport and school and is known to transfer resources from the
wealthier section of the society to the less well off.
Imposition of Taxation in Oman
The taxation along with the various tax policies in the counties of the Middle East are
known to evaluate the general role with regards to know the tax policies which have been
played in the economic enhancement for the Middle East countries.
Comparison of tax laws in Oman and UAE, Oman and the United States of America
The UAE does not levy income tax on the individuals. The country is known to levy
corporate tax on the oil companies as well as on foreign banks. UAE is known to add value
added tax is known to be imposed on the goods and services and there is absence of any kind
of corporate tax On the other hand, there is presence of personal income tax and corporate
tax in Oman and is imposed on labour, pensions and dividends. From the year 2018, the
government of UAE has known to implement the value added tax of five percent. Previously,
most of the tax revenue has been generated from the oil sales. The recent change of the tax
rate of the UAE is VAT will be charged zero percent for the export of goods and service and
on supply of certain educational service. Bare land, residential properties and supply of the
financial services are exempted from the value added tax. The VAT UAE law defines
business to include regular commercial, agricultural and professional activities as well as
services. The United States of America is known to have taxes on income, sales and payroll.
There is presence of payroll taxes, sales taxes as well as property taxes. The corporate tax in
case of Oman is 15 percent and the amount of Vat is 5 percent. On the other hand, the
corporate tax in USA is about 20 percent and the VAT imposed is 11.7 percent.
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CHAPTER THREE
ANALYSIS OF INCOME TAX AND REVENUE GENERATION IN OMAN
Income Tax and Revenue Generation in Oman
Most of the profits attained by the government are with the help of the taxes which are
incurred over the incomes and accumulation of wealth of the personnel. The economy of
Oman is known to be highly dependent on the oil resource which is known to generate 80
percent of the government revenue. The revenue generation is the process through which the
government and the country plans for marketing and sell the products or the services in order
to generate income. The revenue generation can be increased by increasing the consumer
size, increasing the average size of the transaction, by raising the price and also by raising the
frequency of the transactions based on per consumer. The tax reforms are known to play a
very important role while supplementing the non-oil revenues of the Gulf countries. The
income tax in Oman had been first introduce in the year 1971 when Oman was known to
open the doors to the foreign oil companies in order to explore. From the year 1994, Oman
had been the only country who imposed income tax on the business which is also known to
be fully owned by the Omani Citizens. The tax rates have known to evolve from a varying
rate which depends on the level of profit to the current fixed rate for all the tax payers.
Role of Taxation in the economic Development of Oman
Tax can be stated an s more than just a revenue and the growth. Tax is known to play
a very important role for establishing up institutions, democracy and markets by creating the
state liable to the taxpaying individuals. Taxation therefore helps in economic development
of Oman. In this particular country, tax has proven to be an effective tool for improving the
economic performance, controlling the pace of growth and direct resources. The reforms in
taxation have proved to be a valuable mechanism for the growth of the country. Much of the
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growth and economic development of Oman had been taken place because of the oil exports.
It have also known to increase in the government revenue and also helped in increasing the
exports. Even when the economy turns out to be weak, the interest rates are cut in order to
boost the consumer and business demand or by purchasing the financial securities (Ahmad &
Masan, 2015). The tax policies are also known to have played an important role for financing
the economic development. Tax policy also helps in maintain the economy at high
employment level in order to save the capacity of the people with an increase in income per
head.
Raising of Revenue for Government Services in Oman
The revenue generated from the hydrocarbons of Oman has known to be more than 68
percent of the total government revenue in the year 2016. The government revenue which is
sometimes drawn from the hydrocarbons know to have dropped because of the lower oil
prices. Much of the revenue generation takes into place as a result of selling of oil. The
government also earns revenue with the help of income tax in some of the places. The
government of Oman has also started raising international finances for funding of the national
initiatives. The revenues from oil are known to account for about 50 to 90 percent of the total
government revenues. Even though the revenue from the non-oil tax are known to be only
about 17 percent of “gross domestic product” during the same period that has been discussed
earlier. The development of the tax structure is also largely dependent on the shape and size
of the oil revenues which are available to governments. The non-oil revenues in these kinds
of countries come mostly from the custom duties, profit tax of the foreign companies and also
from the fees and fines. Most of the revenue is also earned from the personal income tax and
also from the custom duties which are present in many parts of the country.
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Economic Revitalization
The economic policy of Oman is known to operate under the five year development
plan. The government have already taken many steps for revitalizing the country (Karimi et
al., 2016). The second five year plan of Oman is also known to have impacted the declining
oil prices since the 1990s. The economy of most of the countries of the Middle East is known
to be quite diverse in nature. The national economies is known to range from the
hydrocarbon exporting rentiers to the centralized socialist economies (Burns, 2016). Oman is
known to have several industries which comprises of the crude oil production as well as
refining, natural gas production. There is also a substantial trade as well as budget surpluses.
Most of the government revenue of Oman is known to come from the non-oil industries.
Distribution of Income
The income distribution is how the total gross domestic product of the nation is
distributed among the entire population (Boughanmi, 2019). The income distributions have
also been the major concern of the economic theory as well as for the economic concept. The
income distribution of the society is most importantly represented by the Lorenz curve which
also measures the income inequality. There is also a case of income inequality in Oman.
Oman is also a rural and agricultural country where fishing is one of the main occupations for
the coastal populations. Most of the countries of the GCC are known to lead the world in the
income inequality. From the year 1990 to the end of 2016, only the top ten percent of the
population of these countries are known to enjoy about 60 to 66 percent of the income of the
region. The “world inequality report 2018” has also ranked the countries of the Middle East
as the lead in the economic inequality (Gengler& Lambert, 2016). It is known to rank ahead
of South Africa and Brazil. Some of the report also shows that the top 10 percent and the top
one percent of the population holds more than sixty percent of the region’s national income.
The income inequalities in the countries of the Middle East are known to exist both between
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the countries as within the individual nations. The inequality of the income is present
between the countries, largely due to the geography of the oil ownership.
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CHAPTER FOUR
SIGNIFICANCE OF TAXATION IN OMAN
Omani Economic situation
Oman is one of the richest countries in the Middle East whose gross domestic product
known to have a he amount in the last fifty years. The economic performance of Oman has
known to improve largely due to the rise in the oil prices. Oman have also known to liberalize
the market in the year 2000 and had access to the world trade organization. The government
had also undertaken various projects in order to modernize the economy. Along with
improving the living standards. The economy of Oman has started to perform well in the
year 2018 as a result of high oil and gas prices. Oman is the country in the Middle East whose
gross domestic product of the country known to have expanded in the past fifty years and also
grew at 400 percent (Moore, 2017). The government is also known to take many
development projects for modernizing the economy and also help in improving the standards
of living. In the year of 2000, Oman has also known to become a member of the World Trade
Organization who continue to amend the financial as well as for commercial practices
(Molyneux & Iqbal, 2016). Increase in the agriculture and the fish production are also
believed to be possible with the application of the modern technology.
Taxation as an equipment for Economic Development
It is known that one of the main purposes of taxation is generating revenue for the
government in order to settle its expenditure. The growth of the economy is based on the
increased prosperity. Implementation of new production techniques along with new products
are the main fundamentals of the growth process. The financing of the tax change can also
help in achieving the economic growth (Mohammed, Uddin& Ahmad, 2016). When there
will be presence of high marginal tax rates it will be discouraging work, saving, innovation
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and investment. The specific tax preference will also affect the allocation of the economic
resources. The tax cuts will also be slowing down the long run economic growth with the rise
in deficits(Mohammed, 2017).
Tax as incentive for Economic Growth
The tax incentives which are used for research and capital investment known to have
encouraged various investment activities which requires managers for making the tradeoff
decisions where to allocate the limited funds (Mabry, 2018). It have been seen that the tax
incentives which are known to be the capital investment are known to attract the spending on
the current technology. When the tax law is known to allow the firms for using the tax
incentives for both the research and capital, the firms will be facing resource constraints that
will be limiting the ability to pursue the investment options available(Mears, 2016). The
research and development spending is the substitute for the capital spending as a means for
increasing productivity.
Effects of Fiscal Policies on Economic Development
The fiscal policy is used by the government as the revenue collection and expenditure
for influencing the economy. The fiscal policy is known to be one of the effective tool of the
government for economic development. The large size of the government and its influence on
the economic activity make the fiscal policy quite effective for controlling the public
spending along with the economic growth. The fiscal policy is the mean by which the
government is known to adjust the spending level and the tax rate which will be monitoring
and influencing the economy of the nation (Kahia et al., 2017). The fiscal policy is also
known to stimulate the economic growth during the time of recession. The fiscal policy is
also known to keep the level of inflation low and aims to stabilize the growth of the economy
for avoiding boom and bust in the economic cycle. The fiscal policy can be of two types
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which is either the expansionary fiscal policy or the contractionary fiscal policy which is used
for stabilizing the economic growth of any country (Janský&Palanský, 2018).
CHAPTER FIVE
ROYAL DECREE THAT GOVERN TAXTION IN OMAN
Income tax law in Oman
The government of Oman has known to introduce huge changes in income tax law.
The changes have been subject to speculations for several months, which have looked at
raising the tax profits and enhancing the tax management while stimulating the activities of
small businesses (Eudelle & Shrestha, 2017). The rate of corporate tax had been rising
towards 15 percent from the previous 12 percent. The “Royal Decree No. 9/2017” was issued
in the Official Gazette on 26 February 2017 which is known to introduce huge changes in tax
rates which will be speculated for many months. For this reason, there had been rise in the
general income tax from 12 percent to 15 percent, 3 percent income tax rate for the small tax
payers, tax emption in some of the cases and enhanced penalty provisions outline the main
areas in which Ricardo’s economic theory differs from Karl Marx. The income tax standard
rate is known to be attained to 15%, for tax years initialing on or after 1 January 2017 (Li,
2016). The 30,000 OMR exempted threshold is known to be eliminated.
Withholding Tax
The Oman Ministry of Finance have stated that withholding tax is applied to the
payments for services to foreign persons regardless of the places of the service performed.
This will make it unnecessary for determination of the place where a service is performed and
for this reason I will remove the uncertainty (Akhor&Ekundayo, 2016). In the year 2017,
amendments to the Income Tax Law expanded the range of preserving tax to dividends,
interest, and payments related to services. The tax is levied on certain types of income which
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are realized in the Sultanate for any person which does not have the permanent establishment
on Royalties, dividends on shares or interest, fees for management or in case of performance
of the employees and consideration for conduct of research as well as development. There
has been no official announcement on the effective date of the revised interpretation
(Cummings, 2018). The tax authorities have also been advised that they should not apply for
the new interpretation as that can lead to hardship to the taxpayers.
Taxation for Islamic Finance
Oman have issued licenses for setting up full-fledged Islamic banks and known to
have allowed the conventional banks to have Islamic windows in order to carry out IFTs. It
has also been found out that license have been issued for takaful which is known as the
Islamic insurance (Lai, Ng & Tsang, 2017). The Sukuk which is the Islamic bonds are
known to have used in raising funds. The Central Bank of Oman along with the Capital
Market Authority have allowed Islamic financial institutions for allowing the “Financial
Accounting Standards” which is issued by the “Accounting and Auditing Organizations for
the Islamic Financial Institutions” (Mohammed, Uddin & Ahmad, 2016). The Islamic
Finance transactions is known to be carried out in accordance with the principles of Sharia
and are also known to be different from Conventional Financial Transactions. Under Sharia
there are presence of certain acts which are not being allowed that comprises of riba that is
the interest rate since according to the Islamic teachings, money is not a commodity and
therefore cannot increase the value of its own. The Islamic financial transaction provisions
are known to have been included in the tax law to the level of playing field.
Tax card
The tax card have also been made compulsory for some of the companies in Oman
where they are needed to pay the corporate income tax which is as per the tax law amended
in Oman. The kind of tax law have known to introduce the tax card which is known to be
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Taxation Law in Oman
valid for a known period of time which is also need to be renewed. This also means that each
of the tax payer is known to quote number of the tax card in all cases (Akhor&Ekundayo,
2016). The new tax card is known to help the corporate sector where the government
authorities are known to introduce the value added tax that will be introduced in the coming
year. The tax card is known to be introduced in all invoices. The authorities are also known
to be moving to a self-assessment regime since only a sample of returns is needed to be
assessed (Delgado, 2016).
Penalties
The maximum amount of penalty for the failure to file the returns by the due date is
known to have increase from OMR 1000 to 2000. The penalty for failure for submitting the
information that is known to be requested by the tax authority or for attending the hearing is
known to have increase from OMR 2500 to OMR 5000 (El-Katiri, 2016). A penalty up to
OMR 3000 has been levied for the failure to fulfill with the “Executive Regulations” or
management decisions. When the Principal Officer is known to intentionally refuse to submit
the tax returns can lead to the imprisonment for six months or a fine of OMR 20,000.
Selective Tax
Oman’s Sultan Qaboos have issued royal decree for introducing the selective tax law
which is targeted at foodstuffs and commodities that are harmful to the health of human as
well as for environment. It is known to be expected to be levied on alcohol, carbonated
drinks, tobacco as well as on luxury goods. The rate of tax will be 50 to 100 percent based on
the nature of goods.
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Taxation Law in Oman
CHAPTER SIX
SUMMARY, FINDINGS AND RECOMMENDATIONS
Summary
The above report at first introduces the taxes which are presented in Oman, it also
states about the Royal Decrees of the country. Chapter two states about the description of the
taxation and chapter three states analysis of income tax and the chapter five state about the
Royal Decree which govern taxation in Oman
Findings
It have been found out that taxation acts as an incentive for the economic growth and
also helps in revenue generation for the government. There is also various type of taxation for
the Islamic finance. It have also shown the economic situation of Oman and how the
government raises the revenue for the government services in Oman.
Recommendations
It is suggested that government should look to employ professionals to provide
accurate accountabilities. The government should also be improving the tax revenue base.
The government should be formulating strong regulatory framework for ensuring efficiency
and effectiveness for the purposes of taxation. The government should be also striving in
order to ensure that the tax rates are kept moderate so that there is no tax evasion. The tax
administration should also be granted total autonomy. Better assessment for collection
should be done so that the tax authority functions effectively.
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Taxation Law in Oman
Reference list and bibliography
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Al Shubiri, F. N. (2016). Determinants of foreign direct investment: evidence of Sultanate of
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Al-Muharrami, S. (2015). Interest rate in Oman: is it fair?.Humanomics, 31(3), 330-343.
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economic growth, and financial development in GCC countries: Dynamic
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Feshari, M., Taghipour, A. A., &Valibeigi, M. (2016). Tourism Demand and Tax
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Mohammed, N. S. A. (2017). Population and development of the Arab Gulf States: the case
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Taiwo, J. N., Falohun, T. O., &Agwu, E. (2016). SMEs financing and its effects on Nigerian
economic growth.
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Taxation Law in Oman
Taiwo, J. N., Falohun, T. O., &Agwu, E. (2016). SMEs financing and its effects on Nigerian
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Project Hurdle
1. Introduction:
The introduction comprises of the background of the study which states about the taxation
law in Oman. This part also states how taxes help in the revenue generation for the
government in Oman.
2. Research objective:
The objective of the paper is to find the function of taxation, nature of the personal income
tax, function of taxation and the role of taxation for the economic development of Oman.
3. Research methodology:
The method that have been used in the paper is from the secondary sources which includes
books, websites magazines.
4. Analyses & Findings:
It have been found out that tax acts as an incentive for the revenue generation as well as for
the economic growth of Oman. It have been also found out that there is presence of various
type of taxation in Islamic finances`
5. Discussion & Recommendations:
The discussion is mainly about the various kinds of tax laws in Oman and it is highly
recommended that the government should be employing professionals in order to provide
accurate accountabilities.
6. References:
The references have been obtained from the Google scholar and from various websites of
Oman.
33