Expat remittances will not be taxed, according to Hamood Bin Sanjoor Al Zadjali, chief of Central Bank of Oman (CBO).

Al Zadjali told Al Shabiba newspaper on Tuesday that levying taxes on expatriates is subject to several considerations.

“From the legal aspect, the International Monetary Fund (IMF) agreement, which Oman is committed to, stipulates that no restrictions should be imposed on transfers and payments classified as current international transactions,” said Al Zadjali.

Al Zadjali added that no gulf states impose such taxes so far. He revealed that expat remittances had increased by 1.1 per cent in the first half of this year, reaching more than 2.13 billion rials (Dh20 billion).

“Migrant workers help produce and export new goods as well as implementing mega projects in the country,” he stated.

In November 2014, the proposal for a 2 per cent levy on the billions of rials that expatriates send home every year was approved by Oman’s Majlis Al Shura, the lower elected house of the Council of Oman, to overcome a budget deficit due to a slump in oil prices. But it was later dismissed by the appointed State Council.

Expatriates remit more than 3 billion Omani rials every year, and a tax on the remittances would bring in 62 million rials of revenue to the government.

Tawfiq Al Lawati, a Shura Council member representing Mutrah province, told Gulf News that imposing taxes on expats’ remittances will help fill the state’s coffer amid the slide in oil prices.

In April, Al Lawati proposed a plan to replace the visa renewal fee with a 3 per cent tax on expat salaries but that, too, was dismissed by the Shura Council.

Ahmad Al Beloushi, an economic expert, said imposing taxes on expat remittances will most affect the low-income expats workers in the country.

“I don’t think it’s a good idea in the current time as Oman is looking forward for more investment and implementing more mega projects,” said Al Beloushi.

Since last year Oman has been cutting state subsidies and introducing other austerity measures to curb a budget deficit that totalled 4.02 billion rials in the first seven months of 2016, up from a deficit of 2.39 billion rials a year earlier.

2016 General Budget focuses heavily on austerity measures. It projected a 3.3 billion rial deficit for 2016, which is says it will try to reduce by improving the non-oil revenues as well as cutting expenditures. Oman posted a budget deficit of 4.5 billion rials in 2015, as revenues declined by more than 50 per cent.

The Ministry of Finance has issued 20 circulars so far this year aimed at controlling and managing spending.

In July, the Ministry of Finance said that tracking devices will be installed on all vehicles belonging to government agencies after detecting an increase in expenses incurred by government vehicles recently.

In April, the ministry ordered all public institutions to halt all perks granted to public employees beyond regular payroll. Benefits affected include health insurance for employees and their families, interest-free personal and housing loans, cash bonuses, free scholarships, mobile phones, medical checks, travel health insurance, furniture allowance, and Ramadan and Eid allowances.