VAT delay will mean smoother transition for Oman
February 20, 2018 | 10:20 PM
by Times News Service
Oman could also learn from its neighbours the hiccups in new tax regime implementation

Muscat: Delaying the implementation of value-added tax (VAT) in Oman by a year is a good idea, according to the Chief Economist of the Oman Investment Fund Fabio Scacciavillani.

“Imposing taxes during a period of downturn might not be the right approach. In this sense, I share the view of the government,” Scacciavillani said. He explained that by doing so, the country will also have the added advantage of learning from its neighbours, the UAE and Saudi Arabia, which implemented VAT in 2018.

“We can look at the experience of the UAE and Saudi Arabia and learn from their mistakes or learn how to smoothly enact this provision,” he said. Not a big fan of the VAT system, Scacciavillani said he preferred the sales tax system used in the United States.

“I would prefer to see something similar to sales tax in the United States as it is simpler to administer, for businesses and for the tax authority. VAT means each business has to charge its clients and pay tax on its goods. There has to be double accounting on sales and purchases,” he said.

According to Scacciavillani, in an economy like Oman, which has a lot of small businesses, VAT may just complicate things and increase costs. “For an economy where small businesses are predominant, making things complicated adds to the cost. So, the simpler you keep the taxation system, the lesser the cost entrepreneurs and companies will have to face. Therefore, it will minimise the impact on the economy,” he revealed.

He agreed that there was a debate going on about both taxation systems because while the sales tax system was considered to be simpler, VAT was seen as less distorting.

He, however, was optimistic that the government will make an informed decision after learning from the UAE and Saudi Arabia.

Meanwhile, Ramanuj Venkatesh, who is currently undergoing training in implementation of VAT at his company, felt the delay in VAT implementation would impact the Sultanate in both positive and negative manners.

“Considering that Oman’s credit rating recently dipped, the budget deficit, the unpredictable nature of and unfortunate recent slump in oil prices despite signs of slow recovery at the end of last year and beginning of this year, the delay in VAT implementation would help the country earn state revenues,” he said.

“On the other hand, however, enabling of VAT would allow the Sultanate to earn much-needed revenue for infrastructure development and expansion of civic and public amenities in rural and far-flung areas. It would also help raise Oman’s GDP by some two per cent,” Venkatesh added.

“In the meantime, disabling VAT would help Oman re-strategise its tax policies and focus on allocating funds towards nurturing and developing tourism, hospitality, entertainment and education. It would enable the corporate sector to be well-prepared and well-informed about taxation policies and be VAT-ready. Consumers would be more price conscious and save more before VAT comes into place,” he noted.

Oman’s Ministry of Finance had previously announced that the implementation of VAT would be delayed until 2019.

In the interim period, though, import costs for companies that bring in goods from the neighbouring UAE, which has adopted VAT, will not be affected.

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