Alkesh Joshi, Partner — Business Tax Advisory Services at EY Oman, described the government’s commitment to boosting economic activity in the Sultanate as a striking feature of the newly unveiled budget.
“This is a very promising and optimistic budget from the government, which is a reflection of the mood within the government to continue spending within the economy,” said the expert.
“The growth in expenditure (to RO 12.9 billion in 2019, up from RO 12.5 billion in 2018) is a reflection of that, despite having a $58/bbl assumption in the oil price, when Omani crude currently trades at around $51-52/bbl. Clearly, there will be sufficient money spent to keep boosting the economy, which in turn will lead to more employment creation, and GDP growth,” he stated.
Giving his take on the 2019 Budget, Joshi said the RO 2.8 billion deficit projected for 2019 is unlikely to pose a hurdle for the government to tackle. “The government is confident it can borrow from external sources, which will allow for it to bridge the fiscal imbalance. But the fact there is a commitment on the expenditure side is a positive sign,” he said.
Significantly, the Oman Budget seems to echo the positive outlook projected by the International Monetary Fund and World Bank in their analysis of the Omani economy moving forward, said the expert.
“The overall message coming out of the budget is that 2019 is going to a very positive year for the economy. This is also reinforced by World Bank which has predicted that Oman will witness the fastest growth rate among GCC states in 2019. This budget exudes the same sentiment that the global analysts have had as well.”
A notable feature of the budget statement issued by the Ministry of Finance on Tuesday is a strategy to develop a ‘Multi-year Budget Framework spanning the 2019-2022 timeframe. This reduced four-year timeframe — as opposed to the five-year planning timeframe that has been the hallmark of Oman’s long-term planning strategy — has been necessitated by the extreme volatility witnessed in global oil prices in recent years, according to Joshi.
“The four-year analysis now being introduced is a new initiative of the government because it is of the view that when you do a 5-year planning exercise, volatility in the global hydrocarbon market is so high it’s difficult to pin down an oil price value for a five-year horizon. Although you will have a projection over the 5-year timeframe, a four-year horizon gives you more flexibility to keep revisiting the plan and sort out the realigning of objectives should the need arise.”
The expert also welcomed initiatives by the government to streamline and strengthen the capacities of the country’s tax and customs systems. This improvements are also designed to facilitate the smooth and effective implementation of Excise and Value Added Tax in the future, he noted.
Oman’s tax and customs systems, said Alkesh, comprise multiple direct and indirect tax — such as customs, municipal fees, tourism tax, and so on — that are interlinked in some ways. This list will grow with the eventual implementation of Excise and VAT.
“Bringing all of them under one umbrella or IT set-up makes a lot of sense because you can start tracking the entire economic activity of a tax payer — as opposed to the current situation where different agencies are monitoring different systems and it can be very difficult to reconcile the records across the board. When that happens, there is the possibility of tax leakage happening at some stage, or you will need to ensure that at all the points of taxation, the data being declared is accurate. This will bring in more efficiency while lowering the cost of collecting the tax.”
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