The First Income Tax in the Persian Gulf Signals a Changing Economic Reality

New York Times

02-07-2025

The concept of an income tax has long created debate and anxiety among the citizens of the fossil fuel-rich countries in the Persian Gulf. But no nation actually introduced one until last week, when Oman announced that it would apply a 5 percent tax starting from 2028 on those who make more than 42,000 Omani riyals, or around $109,000.
Officials said that the new tax was intended to promote social equity and reduce the country's dependence on oil and gas, which made up around 70 percent of the state revenues last year. But Oman could also become a testing ground in the region, where the royal families that have ruled for decades have used their resource wealth to subsidize citizens' lives while granting them minimal political participation.
Since oil was discovered in the Arabian Peninsula the 1930s, the Gulf's royal families have run an authoritarian form of government that involves sharing some fossil-fuel revenue their citizens through public-sector employment, subsidies and other state benefits — while keeping a significant portion of it for themselves, through mechanisms that are typically opaque.
The families have combined that strategy with varying degrees of political repression, enabling them to maintain stable, generally peaceful states while limiting political participation.
But that model has come under pressure over the past decade. Oil revenue has fluctuated in several Gulf countries, and their governments have also spent more. They are looking for ways to diversify their economies beyond fossil fuels.
In Saudi Arabia, one of the first major policy changes by Mohammed bin Salman, now the crown prince and de facto ruler, was to cut energy subsidies. That sent citizens rushing to gas stations to fill their tanks before price increases took effect.
Want all of The Times? Subscribe.