Oman is set to introduce a 5% income tax on high-income individuals beginning in 2028, marking the first implementation of personal income taxation within the Gulf Cooperation Council (GCC) states.

This move signifies a significant shift from the traditional tax-free environment prevalent across the GCC region.

The tax will be levied against individuals earning more than 42,000 Omani rials annually, which approximates to $109,000 USD, targeting roughly the top 1% of earners.

The primary objective behind this policy is economic diversification; Oman aims to reduce its dependency on oil exports by broadening its revenue streams.

The Minister of Economy, Said Al-Saqri, confirmed the initiative, emphasizing that the government remains committed to safeguarding social spending while advancing fiscal reforms.

This decision stands in contrast to traditional GCC policies, which have historically attracted high-income foreign professionals with tax-free income.

However, Oman's move is anticipated to maintain its competitiveness due to the limited scope of the tax.

The International Monetary Fund (IMF) has previously advised Gulf nations to consider personal income tax as a part of their strategies to prepare for diminishing oil demand.

In line with this advice, Oman has been actively working towards modernizing its economy.

For instance, it successfully raised $2 billion through the initial public offering (IPO) of its state energy company's exploration and production (E&P) unit in the previous year.

The new income tax policy is a part of a broader reform agenda aimed at ensuring fiscal sustainability in Oman’s post-oil era.

This development could serve as a precedent for other GCC states, especially those facing similar economic pressures to diversify their revenue bases.

With Oman's move towards fiscal reforms, the country positions itself strategically for long-term economic stability.