Oman becomes first Gulf state to launch income tax in bid to reduce oil dependence

Oman will impose income tax starting 2028, becoming the first Gulf state to do so. The new 5% tax applies only to annual incomes of 42,000 rials ($109,000) and above, affecting roughly the top 1% of earners, Bloomberg quoted the state-run Omani News Agency as saying late Sunday.

Minister of Economy Said bin Mohammed Al‑Saqri said the measure aims to reduce dependence on oil revenue while preserving social spending.

The move marks a shift in a region where no member of the six‑nation Gulf Cooperation Council (GCC) levies income tax. For years, this policy has attracted highly paid foreign workers to the area, making Oman’s decision significant.
“While the scope is narrow, it will still be a significant fiscal development in the region,” Monica Malik, chief economist of Abu Dhabi Commercial Bank, told Bloomberg. “Oman is looking to progress with fiscal reforms while still remaining competitive. This is especially at a time when high‑net‑worth individuals are moving to the region.”

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Although most GCC nations have solid fiscal positions — only Saudi Arabia and Bahrain are expected to run deficits this year — the International Monetary Fund has said these states may eventually need income taxes as global demand for fossil fuels wanes.

Oman has been pursuing reforms to reduce its reliance on oil revenue, in line with other Gulf nations. The sultanate has raised funds through privatization, including a record $2 billion from the initial public offering of its state energy company’s exploration and production unit last year. Malik said Oman’s income tax “could act as a catalyst to other GCC countries implementing the tax as well in the future.”