Muscat: It is possible to diversify government revenue without taxation even in the face of significant falls in domestic energy prices, research by Oxford Strategic Consulting for major Gulf Cooperation Countries (GCC) governments has found.
Given the volatility and unpredictability of oil prices, the primary economic strategy for all GCC states is to diversify government income and reduce dependency on oil and gas revenues. However, introducing taxation in the GCC region may prove a hard pill to swallow for citizens whose economic, political and social lives are based on a tax-free, subsided and levy-free way of life.
In an 18-point plan developed for one particular GCC government, Oxford identified non-tax revenue sources with the potential to generate at least 10 per cent to the gross domestic product (GDP).
One of these innovative revenue sources is maximising government revenues, such as state-owned enterprises (SOEs) and pension funds, which are currently untapped and could produce a huge rate of return.
Oxford has also suggested better utilising and deploying the national workforce in creative ways to not only generate government revenue but also to support other objectives such as increasing entrepreneurialism and private sector employment.
This is feasible given that GCC governments are, on the whole, the favoured employer for nationals and often have an excess of human resources.
Another revenue source is increasing the willingness and ability of citizens to contribute to the national economy using ‘nudge’ motivational techniques as used by the UK government’s Behavioural Insights Unit.
Creating new revenue generating ventures in areas where effective service impacts the well-being of the population or where it could compete effectively with the private sector, Oxford says. It says that this is more desirable than selling overseas investments and privatising state assets, both of which provide only ‘one-off’ revenue whilst losing long-term income.
Oxford has also recommended minimising cost in new ventures. As many resource-rich governments are embarking on massive infrastructure projects for national development, there is great potential for increasing revenue and reducing risk.
Oxford’s research demonstrates that there are previously unconsidered solutions to help balance government revenues whilst also maintaining economic and social stability. Every GCC country and other resource-dependent economies need to act now before it is too late to adopt these innovative solutions.
Oxford Strategic Consulting is an Oxford- and GCC-based consultancy that specialises in building human capital across the GCC and Europe.