Oman Taxation: Revenue Generation and Economic Development Analysis

This essay examines the role of taxation in revenue generation and economic development in Oman. It begins with an introduction to taxation in Oman, outlining the aims, objectives, and significance of the study, followed by a review of relevant literature. The essay distinguishes between tax, income, and capital, and explores the purpose and function of taxation in Oman. It analyzes the relationship between income tax and revenue generation, emphasizing taxation's role in Oman's economic development, including raising revenue for government services, economic revitalization, and income distribution. Further, the essay discusses the significance of taxation in the context of Oman's economic situation, highlighting its role as a tool and incentive for economic growth, and the effects of fiscal policies. Finally, it examines the Royal Decrees governing taxation in Oman, including income tax laws, withholding tax, taxation for Islamic finance, tax cards, and penalties. The study concludes with a summary of findings and recommendations for improving Oman's taxation system.

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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Taxation Law in Oman
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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Taxation Law in Oman
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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Taxation Law in Oman
Summary..............................................................................................................................25
Findings................................................................................................................................26
Recommendations................................................................................................................26
Reference list and bibliography...............................................................................................27
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Taxation Law in Oman
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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Taxation Law in Oman
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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Taxation Law in Oman
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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Taxation Law in Oman
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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