Monday 28th, December 2015 / 23:45 Written by

Fiscal exercise: Measures in place to cover financial shortfall

By Samuel Kutty — MUSCAT: Dec. 28: While the Sultanate is readying for the 2016 budget, all eyes are on the minister responsible for finance who has to strike a balance between revenue and expenditure. Darwish bin Ismaeel al Balushi, Minister Responsible for Financial Affairs, said that the measures taken by the government, especially expenditure cuts, have helped the government reduce the impact on the general budget both in terms of spending or revenues. “There are measures that have been taken and will be beefed up to cover the deficit,” he told reporters yesterday. The expenditure rationalising procedures goes very well and that the ministries are showing cooperation, under-standing and positive response.

“These measures will continue in response to the current situation. Also everyone is expected to join hands as covering the deficit is a joint responsibility. Efforts to rationalise expenditure are going on,” he said. All officials involved in governmental affairs are briefed on the steps taken by the government to either activate or improve non-oil revenues or rationalise and cut government expenses, he added. “The Ministry of Finance issued a number of circulars to urge and encourage the government departments to limit expenditure on unnecessary items,” he informed. The measures taken by the government are clear and tangible, and the relevant agencies are well aware of them, he added.

The Majlis Ash’shura members have already voted for major economic reforms to make up for a huge budget deficit, which will target the private sector. But the general fear is that the private sector may bear the brunt of the fiscal reforms likely to be unveiled in the new budget. “We know there will be new or a rise in the existing corporate taxes,” said managing director of a leading oilfield supply company. But a rise in corporate tax has the same effect as an increase in costs. Businesses may be forced to pass some of this tax on to consumers by way of raising prices, he said.

Many also fear that the tax hikes will result in job cuts, stunt economic growth, hit small companies and start-ups, and encourage big businesses to leave the country. The Majlis has already voted for an increase in corporate taxes. “We are in favour of a three per cent rise in corporate tax, removing the tax free ceiling of RO 30,000 for companies,” a Majlis member, who did not want to be identified, told the Observer. Plunging oil has slashed the government’s revenues, pushing it deep into the red. Oil revenue at the end of September this year stood at RO 4.2 billion, compared to RO 7.8 billion in the nine months of 2014. But Bader al Riyami, head of a logistics company, pointed out that budget in 2015 projected a 25 per cent increase in revenues from taxes and fees without any change in corporate tax rates.

“Tax revenues too are expected to decline in 2016 if the tax rates and tax base remain the same in Oman,” he warned. While referring to the 2016 budget in the neighbouring United Arab Emirates, Bader said that 19 per cent of the budget will come from tax revenues, including customs and taxes on foreign banks, while oil revenues will account for only 6 percent due to lower global oil prices. The UAE government on Sunday approved a zero-deficit budget of Dh 46.1 billion for 2016 with a major chunk of expenditure on social development and infrastructure. But in Oman, the Shura member said, the oil slump has pushed the government to mull cut in spending on projects, sell bonds and order departments to find ways of minimising expenditure. “There is no move to delay any major development initiatives,” he said, adding, “no reforms will be adopted that will impact citizens.”