Oman announced it plans to levy an income tax on wealthy individuals beginning in 2022. The measure, if implemented, would signal a turning point in a region where tax-free income is the norm. German diplomat Joachim Duster has closely followed Gulf affairs since the 1970s and told Al-Monitor, “Oman is waking up to the realities of this world.”
But the clock is ticking, and a repeatedly delayed 5% value-added tax is expected to be introduced in April 2021, as government coffers are at risk of further depletion. Oman is on track to post its seventh straight year in the red while public debt is expected to reach 80% of gross domestic product this year, 16 times more than the number in 2014.
“It is the middle class that is going to be hit badly … I think the upper-income class will find ways to evade the personal income tax,” Abdullah Baabood, visiting professor at Waseda University, Tokyo, told Al-Monitor.
At a time when future global oil demand is uncertain, the Gulf state still relies on oil sales for half of its annual revenues. Sworn in Jan. 11, Sultan Haitham bin Tariq Al Said inherited a cash-strapped country from his predecessor, known to be the "father of modern Oman."
“Sultan Qaboos was moving Oman into a rentier state, while Haitham's task, in a way, is to move the country out of it,” Duster said. The coronavirus pandemic helped the ruler to rally public support, he added, “in normal times, people would have protested.”
'Everyone is worried about the future'
To bring public deficits under control, Oman cut government spending by 10% this year and slashed long-term investments. W
ith the impact of reduced capital expenditures on state-led reform plan Vision 2030 still unclear, uncertainty lies ahead.
“Unemployed youths do not see this as a positive move because they expected more spendings in the public sector, meaning more jobs for them,” said Omran Al Abri, a postgraduate student. About 43% of Omanis work for public entities, but youth unemployment is rampant.
Beyond austerity, Oman also plans to streamline its administration: The country’s sovereign wealth fund took over all state-owned companies in June and announced the restructuring of 15 boards of directors. Haitham previously pledged to “revise the work of government companies, with a view to upgrading their performance.”
“Everyone is worried about the future, there is no optimistic indicator that there will be jobs in the next few years,” said Muneera Al Balushi, a political science graduate. She told Al-Monitor that an $850 minimum wage introduced in September for Omani citizens regardless of their educational qualifications is “too low" compared to the cost of living.
The Omani Ministry of Finance did not respond to a request for comment.
With few solutions in sight and challenges posed by debt repayment increasing, analysts expect Gulf neighbors to provide financial support. Last week, the Financial Times revealed Qatar provided $1 billion in financial support to Oman, but warned this could come at a price with regard to the country's independence in handling regional affairs.
“The style might change, not the fundamentals,” Baabood said about foreign policies led by Badr bin Hamad bin Hamoud Al Busaidi. The new foreign minister replaced veteran diplomat Yusuf bin Alawi bin Abdullah in August during a Cabinet reshuffle.
As Oman reforms its government apparatus, Duster questions its readiness, saying, “Do they have the skills and expertise to carry through the reforms?”
In May, Muscat announced the contract of 70% of public sector's foreign expert employees will not be renewed.
'No taxation without representation'
Unlike his predecessor, who had the financial ability to allocate public resources to buy social peace, Haitham faces pressure to involve citizens in decision-making processes. Pro-reform activists said the implementation of new taxes should translate into the right for taxpayers to express critical views and challenge public policies.
Balushi believes the Majlis al-Shura could be an effective state-citizen communication channel, but notes that the legislative body only has “limited powers.”
According to Baabood, the new leadership engages in dialogue with citizens, but “the consultation is still limited to just ‘we need you to support’ rather than ‘we need to discuss.’”
Gulf leaders fear politically active citizens could pose a threat to the stability of ruling elites and have long supported draconian regulations to restrict the freedom of expression. Nabhan Alhanshi, director of the London-based Omani Center for Human Rights, believes economic reforms might not translate into a change in the political culture.
Earlier this year, Alhanshi was allegedly approached via informal channels by the Embassy of Oman in London and offered a “safe return” to Muscat in exchange for stopping his criticism of the sultanate’s policies. “I was arrested twice for defending freedom of expression, so it would be silly to go back and shut my mouth,” he told Al-Monitor.
The Embassy of Oman in London did not respond to a request for comment.
'Let young people be angry, let them scream'
The Gulf's security agencies have attempted to reign over social networks and shape online public discourse since the 2011 Arab Spring. In Oman, Alhanshi and other rights defenders accuse the Internal Security Service of operating a network of fake social media accounts to “talk on behalf of the government” and harass pro-reform activists.
Following tweets that “criticised corruption and called for justice,” former Shura Council member Salem al-Awfi and journalist Adel al-Kasbi were sentenced to one year in prison in June for harming public order, Human Rights Watch reported.
Habiba Al Hinai, an Omani human rights activist exiled in Germany, believes Omani officials should be more understanding. She told Al-Monitor, “Let young people be angry; let them scream. Nobody is saying to take down the government, they just express their anger and worry about the future.”