1. What is an excise tax?

In layman’s terms, an excise tax is an indirect tax imposed on the sale of select goods and services. Excise taxes are charged by the government and collected earlier in the supply chain but are ultimately borne by end consumers.

In Oman, the excise tax (once implemented) will be collected by businesses on behalf of the Secretariat General for Taxation (“SGT”).

2. Why is Oman introducing the excise tax?

There are two primary reasons why the excise tax is being introduced in Oman. Firstly, the tax is being imposed on ‘unhealthy consumer goods’ such as tobacco, alcohol and carbonated beverages.

While the overall health of the population has improved, countries in the Middle East (including Oman), rank high on lifestyle related diseases (heart disease, diabetes, etc.). Risk factors driving these include (but are not limited to) high body mass index, tobacco, high LDL, etc. Hence, this move by the government may be seen as a step towards curbing certain NCDs.

Secondly, economic diversification and generating non-hydrocarbon revenues has long been a priority for Oman. Funds generated from the excise tax may be used to drive broader government public policy objectives.

3. What are the goods being taxed and will anything else be taxed in the future?

Currently the goods to be taxed are as follows:

• Tobacco and tobacco derivatives: 100%
• Carbonated drinks: 50%
• Energy drinks: 100%
• Alcohol: 100%
• Pork products: 100%

Unflavoured aerated water will not be subject to the tax. Currently, there is no further indication whether any other goods will be taxed or not.

4. What countries in the Middle East have introduced this already?

Saudi Arabia was the first country to introduce the tax in 2017. United Arab Emirates and Bahrain followed suit in the same year. In Oman, the excise tax will be effective from 15 June 2019.

5. What does this mean for consumers?

As mentioned before, the tax directly affects end users. People consuming tobacco products and/or alcoholic beverages will notice a steep hike retail prices for these products.

Ultimately it remains to be seen if this measure will drastically alter consumer behavior.