The idea of an income tax has long been a topic of discussion and concern among the citizens of the fossil fuel-rich countries in the Persian Gulf. However, no country had implemented one until recently, when Oman announced that it would impose a 5 percent tax starting from 2028 on individuals earning more than 42,000 Omani riyals, equivalent to approximately $109,000.
Government officials stated that the new tax is aimed at promoting social equity and reducing the country’s reliance on oil and gas, which accounted for about 70 percent of state revenues last year. Oman may also serve as a model for other nations in the region, where ruling royal families have historically used their resource wealth to support citizens’ lives while granting them limited political involvement.
Since the discovery of oil in the Arabian Peninsula in the 1930s, the Gulf’s royal families have maintained an authoritarian form of governance. This involves distributing some fossil-fuel revenue to citizens through public-sector jobs, subsidies, and other state benefits, while retaining a significant portion for themselves through typically opaque mechanisms.
These families have combined this strategy with varying levels of political suppression, allowing them to maintain stable and generally peaceful states while restricting political participation.
However, this model has faced increasing pressure over the past decade. Oil revenues have fluctuated in several Gulf countries, and government spending has also increased. As a result, these nations are seeking ways to diversify their economies beyond fossil fuels.
In Saudi Arabia, one of the first major policy changes by Mohammed bin Salman, now the crown prince and de facto ruler, was to reduce energy subsidies. This led citizens to rush to gas stations to fill their tanks before price increases took effect.
— news from The New York Times
— News Original —
The First Income Tax in the Persian Gulf Signals a Changing Economic Reality
The concept of an income tax has long created debate and anxiety among the citizens of the fossil fuel-rich countries in the Persian Gulf. But no nation actually introduced one until last week, when Oman announced that it would apply a 5 percent tax starting from 2028 on those who make more than 42,000 Omani riyals, or around $109,000.
Officials said that the new tax was intended to promote social equity and reduce the country’s dependence on oil and gas, which made up around 70 percent of the state revenues last year. But Oman could also become a testing ground in the region, where the royal families that have ruled for decades have used their resource wealth to subsidize citizens’ lives while granting them minimal political participation.
Since oil was discovered in the Arabian Peninsula the 1930s, the Gulf’s royal families have run an authoritarian form of government that involves sharing some fossil-fuel revenue their citizens through public-sector employment, subsidies and other state benefits — while keeping a significant portion of it for themselves, through mechanisms that are typically opaque.
The families have combined that strategy with varying degrees of political repression, enabling them to maintain stable, generally peaceful states while limiting political participation.
But that model has come under pressure over the past decade. Oil revenue has fluctuated in several Gulf countries, and their governments have also spent more. They are looking for ways to diversify their economies beyond fossil fuels.
In Saudi Arabia, one of the first major policy changes by Mohammed bin Salman, now the crown prince and de facto ruler, was to cut energy subsidies. That sent citizens rushing to gas stations to fill their tanks before price increases took effect.
Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.
Thank you for your patience while we verify access.
Already a subscriber? Log in.
Want all of The Times? Subscribe.