As the Gulf changes, so will its conversation about income tax

No one enjoys paying tax, and for many years part of the Arab world ’s appeal for millions of expatriates has been the absence of a levy on personal income. But nothing stands still forever, and a changing Arab economy, especially in the Gulf – one that is more diversified and less founded on natural resources – has led governments to think about new ways of raising revenue. The latest development in this years-long process has been the recent decision by Oman ’s Shura Council to forward a draft law on personal income tax to the State Council, a move that suggests the idea is gaining momentum. Although the exact details are still being finalised, if passed, the sultanate’s personal income tax would be a GCC first and could affect high-earners, with citizens taxed on net global income above $1 million and foreign residents on Oman-sourced income above $100,000. The economies of the six GCC members are all different, and Oman has specific reasons to be more open to personal income tax at this moment. According to James Swallow, commercial director at business formation and support provider PRO Partner Group, Oman attracts less foreign direct investment than the neighbouring UAE or Saudi Arabia . “This is similar to European countries like the United Kingdom, which generates government funds through tax, allowing them to inject the tax back into the local economy for infrastructure, social programmes, health care, water and waste management," he added. This is an important point: taxation is a significant and delicate factor in the relationship between citizens and residents who generate wealth, and governments that provide security and services. As US author and entrepreneur Holly Sklar puts it: "Taxes are how we pool our money for public health and safety, infrastructure, research and services – from the development of vaccines and the internet to public schools and universities, transportation, courts, police, parks and safe drinking water." There is no doubt that with rights and entitlements come some responsibilities. The corporate tax regime in GCC countries rightly guarantees the state some revenue from companies that have enjoyed the considerable legal, commercial and logistical advantages of making profits in a prosperous, stable and innovative environment. Similarly, comparable taxes have become more common in recent years. In the UAE , advancements in social welfare spending – such as the 2022 introduction of an unemployment insurance scheme for citizens and residents – have gone hand in hand with forms of modest taxation, such as VAT in 2018 as well as a network of road tolls. Nevertheless, there is little sign yet of personal income tax being introduced in other GCC states; the UAE and Saudi Arabia – two countries that lead the region in attracting international companies and talent – have previously indicated that they have no plans yet to impose such a levy. In a global market for investment and human capital, competitiveness remains crucial. However, much has changed in recent years. The earlier model of untaxed income generated by foreign workers who come and go is increasingly being replaced by societies that offer long-term residence and the right for foreigners to own property. As these changes take root, a more nuanced framework around earnings, taxations, rights and obligations is emerging.