Tax hike to affect oil & gas, mining revenues for firms in Oman

Business Friday 27/May/2016 21:38 PM
By: Times News Service
Tax hike to affect oil & gas, mining revenues for firms in Oman

Muscat: An amendment in article No. 112 of the Income-Tax will increase the cost of LNG, and lead to petrochemical and mining companies paying more tax.
A joint session of the State Council and Majlis Al Shura, based on the Royal Directives of His Majesty Sultan Qaboos bin Said, took place on Thursday and voted on the Income Tax Law, which included amendments in some of the provisions of the Insurance Companies Law and the Foreign Capital Investment Law.
The session approved the provisions under dispute during the proposed amendments on the Income Tax Law, the Foreign Capital Investment Law and Insurance Companies Law and submitted to His Majesty the Sultan, together with the opinions of the two houses after examining and discussing them during the session.
LNG firms will have to pay 55 per cent tax, instead of 12 per cent. Fighting for the implementation of the new tax, the Shura’s proposal won the vote and raised the LNG firm’s tax to 55 per cent while the State Council had suggested hike to 15 per cent .
Moreover, the members at the joint session also voted for imposing a 35 per cent tax on both petrochemical industries and non-oil natural resource exports. However, the vote resulted in the refusal of the proposal to impose a 3 per cent tax on insurance. The joint session vote approved the amendments made by the Ministers Council on Foreign Capital Investment Law to impose tax, except for industries and investments, based on the suggestion of the concerned minister.
“The tax on petrochemical firms has been approved,” Tawfiq Al Lawati, Shura member told the Times of Oman. The tax on producers of LNG is currently 12 per cent.
Observers said taxes have been raised by many Gulf countries in order to make up for the losses stemming from the sharp drop in oil prices.
The State Council Chairman said during an opening speech that the meeting comes in the wake of the implementation of the orders of His Majesty the Sultan to send back the following draft laws to the Council of Oman and hold a joint meeting of the State Council and Shura for a unified opinion on the comments already made by the two houses on ‘amendments of some of the provisions in the Insurance Companies Law’, discussing the provisions under dispute on ‘amendments of some of the provisions of the Foreign Capital Investment Law,’ along with a discussion on the provisions under dispute on ‘some of the provisions of the Income Tax Law’ referred by the Council of Ministers.
“It is not only in Oman, but all over the GCC countries, who are also imposing more taxes,” Ahmed Al Hooti, member of the Oman Chamber of Commerce and Industry (OCCI) told TOO.
Al Hooti said there is no other way to cover all the expenses.
Although the Majlis and Council-approved tax figures are high, many believe the impact on the market will be high as well.
Shiv Gupta, the chief executive officer of a private company in Muscat, said it is one of the ways for the government to cover its deficit “to balance the economy of the country.”
According to Krishnan MAK, an economist in Muscat, taxes may not augur well to the petrochemical companies, “but when we consider the current situation, the government needs to adopt such measures.”
Others see “bad news” in the latest development. “That is bad news for those involved in the petrochemicals and related sectors,” said a businessman dealing with petrochemicals in Muscat, who refused to be named.
In January, the Oman government had unveiled its OMR3.3 billion deficit budget with a series of spending cuts and tax hikes to offset decreased revenues following the drop in oil prices.
Oman had posted a budget deficit of OMR4.5b in 2015, as revenues more than halved. In the report, the IMF said despite actions taken so far, the dip in oil prices has affected Oman’s economy.