Latest news with #fiscalreform
Zawya
07-07-2025
- Business
- Zawya
Reforms and Oman Vision 2040 drive recovery, confidence
MUSCAT: Just a few years ago, Oman faced one of the most challenging periods in its fiscal history, grappling with plunging oil prices, mounting public debt and global disruptions that pushed the nation into a deep deficit. Today, however, Oman is on a different path — one defined by recovery, economic reforms and renewed confidence in its future. A June 2025 report by Bahrain-based regional asset manager and investment bank SICO BSC, titled 'Rise of Oman: An Example of Fiscal Prudence,' confirms that Oman ended 2024 with a budget surplus of approximately RO 1 billion. At the same time, the country succeeded in reducing its public debt to RO 15.3 billion, equivalent to just 36.5 per cent of GDP, down from a high of 64 per cent in 2020. The seeds of recovery were planted in 2015 when Oman faced a record budget deficit of RO 4.6 billion. In response, the government implemented aggressive cost-cutting measures. Fuel subsidies were reduced, saving RO 479 million, while electricity subsidies were trimmed by RO 386 million. Defence spending was slashed by RO 350 million and civil ministry budgets were tightly managed. After His Majesty Sultan Haitham bin Tarik assumed leadership in 2020, Oman accelerated its fiscal reforms. The government focused on diversifying its revenue sources and enforcing strict control over expenditures, even during the Covid-19 pandemic. A major milestone was the introduction of VAT in April 2021, which raised RO 301 million in its first year. Between 2020 and 2023, tax and fee revenues increased by approximately 70 per cent, helping reduce dependence on oil revenues. The government's restraint in public sector hiring and wages also played a role. Over the past decade, public sector salaries and benefits have remained largely flat, allowing the state to avoid long-term financial burdens and maintain greater fiscal flexibility. Oman also benefitted from rising oil prices after 2021. While other Gulf states cut production under OPEC+ agreements, Oman maintained strong export volumes, allowing it to capitalise on market conditions. By 2024, Oman had reduced its budget breakeven oil price to $55 per barrel, down from $100 in 2014. This fiscal strength was recognised internationally when Oman's credit rating was upgraded to investment grade (BBB-) in September 2024, a move that is expected to reduce borrowing costs and improve investor confidence. Looking ahead, the 2025 budget projects a modest deficit of RO 620 million, largely due to cautious oil price assumptions. However, analysts — including those at SICO — believe Oman could record another surplus if oil prices remain favourable. To fund priority projects, the government plans to raise RO 750 million through new bonds and sukuk this year. With its finances stabilised, Oman is preparing for a new phase of strategic development aligned with Oman Vision 2040. Key projects include Sultan Haitham City ($2.6 billion), HyDuqm Green Hydrogen Hub ($7.5 billion) and later phases of green hydrogen expansion ($27 billion). Other major initiatives include the Duqm Green Steel Plant, the now-operational Duqm Refinery and revitalisation of Al Khuwair Downtown. Real estate and tourism projects in Yiti, a new UAE–Oman rail network and renewable energy projects such as the Ibri III Solar Plant and five wind power plants are also in the pipeline. 'These projects are not just about infrastructure,' the SICO report notes. 'They're a catalyst for national growth and investor confidence'. Oman is also planning for the long term by broadening its tax base. A domestic minimum top-up tax will be introduced in 2025, followed by the rollout of personal income tax in 2028, representing a major policy shift in the Gulf. At the same time, Oman's capital markets are positioned for growth. Despite returning just 15 per cent over the past decade, the market achieved 10 per cent annualised returns in the past five years. With stocks trading at a forward price-to-earnings ratio of 9.5x, there is potential for market re-rating. The launch of the Tanmia Liquidity Fund in May 2024 is expected to further deepen investor participation. Oman's transformation from fiscal fragility to financial resilience did not happen by chance. It required tough decisions, steady leadership and a focus on long-term stability. As SICO concludes, 'The fiscal consolidation achieved over the past five years provides a strong foundation for Oman to accelerate its ambitious development agenda'. 2022 © All right reserved for Oman Establishment for Press, Publication and Advertising (OEPPA) Provided by SyndiGate Media Inc. (
Free Malaysia Today
04-07-2025
- Business
- Free Malaysia Today
Fiscal reform: short-term pain for long-term (and short-term) gain
The Madani economic framework has set ambitious goals for fiscal stability and an improved revenue-to-GDP ratio. As I had recommended from the start this process is following three main stages. The first involves cutting wastage, leakages and corruption with subsidy rationalisation at its core. So far savings have been made of RM4 billion from electricity tariff reform, RM7.5 billion from diesel rationalisation and around RM1.5 billion from other areas. To this RM13 billion we expect to see at least RM8 billion from RON95 rationalisation. This RM21 billion is a structural saving which will continue each year and is equivalent to 6.3% of current operational expenditure or 23.6% of development expenditure. The second stage of fiscal reform involves assessing tax options and making modest well-scheduled adjustments rather than large and disruptive quick fixes. So far relatively minor tax changes have been introduced, mostly targeted at the rich, including the high-value goods tax (HVG), the digital goods tax (DGT), the capital gains tax (CGT) and the low-value goods tax (LVG). These could raise around RM2.5 billion. The biggest changes have been in the sales and services tax (SST) which raised RM5.5 billion last year and from next month will raise RM5 billion for the rest of this year and RM10 billion annually thereafter. Added to the subsidy savings, these structural tax changes are equivalent to 10.1% of current operational expenditure or 38.2% of the 2025 development expenditure budget. The final stage of fiscal reform, which we are about to enter, is to restructure the system for the long-term particularly to diversify the revenue base for greater stability, predictability and efficiency. This means setting a new revenue model to reduce dependency on volatile revenue sources and Malaysia's historical reliance on commodity-based revenues from Petronas which may last for only the next 15 years. A broader and more resilient tax and revenue base helps to insulate the economy from global volatility and commodity price fluctuations by focusing on more stable and predictable domestic revenue sources which rise as the economy grows and so maintains the revenue-to-GDP ratio organically. Despite these modest and well-scheduled changes, there has been the usual chorus of outrage, especially from business groups who would scream in pain if hit by a falling feather. The truth is that the short-term pain of adjustment costs and minor price rises have mostly already ended and the majority of people did not even notice it. It is not surprising that businesses support the reintroduction of the goods and services tax (GST) because they mostly do not pay it, they reclaim it after passing on price increases to consumers. The discussion of the reintroduction of GST is unhelpful, especially because it has been ruled out for now. In considering options for new or expanded taxes the government must take a fresh approach that reflects changes in the economy, such as the emerging gig-economy and the expanding e-payments and e-ecommerce industry. A feasible alternative is the e-payments tax (EPT) which is a very broad-based, tiny tax with an efficient and effective mechanism to raise significant revenue without too much economic distortion or burden on businesses and consumers. A simple 3% e-payments tax would raise RM43 billion, almost enough to replace SST all together. The benefits of a robust fiscal position are many. Raising revenue and controlling spending reduces the need for government borrowing and the financing costs of that which at almost RM50 billion a year are the third largest demand on government spending. Better revenue and reducing wastage, leakages and corruption also provides savings and income that can boost other priorities such as health, education and social protection including income support and retirement pensions. These are not only 'long-term' gains, we are already seeing the possible benefits of the subsidy rationalisation and tax reforms so far worth at least RM34 billion. For example, the budget for cash aid for schemes such as the Sumbangan Tunai Rumah (STR) and Sumbangan Asas Rahmah (Sara) was increased by 30% to RM13 billion in Budget 2025 and almost nine million people benefit from cash transfers through STR. Sara recipients have increased from 700,000 to 5.4 million, each eligible for monthly payments through MyKad. Public healthcare spending rose to RM45.3 billion in Budget 2025, a 9.8% increase compared to the previous year. Education spending hit record levels rising 9.2% in Budget 2025 and even higher education benefitted by an extra 10.4%. These changes directly improve the quality of life for everyone, enhance human capital development and increase productivity for businesses. In the next stages, strategies to cushion the impact of economic change on vulnerable groups become more affordable. These include targeted cash transfers, a universal basic income, a basic pension in retirement, accessible public transport, reducing out-of-pocket expenses for healthcare and investment in the care economy as the population ages. In fact, almost all of the promises of the last election manifestos become possible before the next general election holds the government to account. Increasing revenue must also be accompanied by responsible spending and anti-corruption measures to ensure public trust. A Government Procurement Act and a change in the mindset of policy design to end 'patronage cascades' that channel money to vested interests would both help ease concerns about higher taxes and lower subsidies. Above all, fiscal reforms should continue to be implemented thoughtfully, and to garner public support the government must improve its communication strategy to link fiscal reforms definitively to the social benefits we are already seeing and which are promised for the long-term. The views expressed are those of the writer and do not necessarily reflect those of FMT.
Malay Mail
20-06-2025
- Business
- Malay Mail
‘We collect taxes to return them to the people': PM justifies SST expansion, says Malaysians to benefit through welfare aid
PUTRAJAYA, June 20 — Prime Minister Datuk Seri Anwar Ibrahim has today assured the public that his administration's fiscal reform will not compromise the welfare of the majority. Speaking to Finance Ministry staff, he said that broadening the tax base by expanding the Sales and Services Tax (SST) will instead allow Putrajaya to enhance its assistance and services for Malaysians. 'In Malaysia, subsidies are given to everyone, even foreigners, those who don't pay taxes, and the wealthy earning RM1 million a month receive electricity subsidies,' he said in his speech at the Finance Ministry monthly assembly here. 'What we're doing now is removing those subsidies, making them pay the actual cost while allowing Tenaga Nasional Berhad to earn a reasonable profit. Through this, we save RM4 billion. 'And what is that RM4 billion for? It goes to the schools and hospitals,' he added. Anwar cited targeted aid initiatives such as the Rahmah Cash Aid (STR) and Sumbangan Asas Rahmah (SARA) as key examples of how public funds are being channelled back to those who need them most. 'What are we collecting billions in taxes for? As everyone knows, the total allocation for STR and SARA amounts to RM13 billion and benefits nine million people. 'So this is our reasoning, we collect these taxes and return them to the people,' he said. Anwar also said that the Ministries of Education and Health have received increased allocations in the current budget as part of efforts to enhance the country's education and healthcare systems. 'That's why in deciding on this matter, we need to look at it from a macro perspective. If we look at past budgets, there were some good elements, but the significant increase in allocations for health and education reflects our priorities,' he said. Earlier this month, the Ministry of Finance announced the implementation of revised SST rates and expanded scope of the Service Tax effective July 1, 2025 to strengthen the country's fiscal position by increasing revenue and broadening the tax base. However, the announcement has since faced criticism from various quarters, with calls to delay its implementation over concerns that it could worsen the cost of living and place additional pressure on small businesses amid fragile economic conditions.
Malay Mail
20-06-2025
- Business
- Malay Mail
‘We collect taxes to return them to the people': PM justifies SST expansion, says Malaysians to benefit through welfare benefits
PUTRAJAYA, June 20 — Prime Minister Datuk Seri Anwar Ibrahim has today assured the public that his administration's fiscal reform will not compromise the welfare of the majority. Speaking to Finance Ministry staff, he said that broadening the tax base by expanding the Sales and Services Tax (SST) will instead allow Putrajaya to enhance its assistance and services for Malaysians. 'In Malaysia, subsidies are given to everyone, even foreigners, those who don't pay taxes, and the wealthy earning RM1 million a month receive electricity subsidies,' he said in his speech at the Finance Ministry monthly assembly here. 'What we're doing now is removing those subsidies, making them pay the actual cost while allowing Tenaga Nasional Berhad to earn a reasonable profit. Through this, we save RM4 billion. 'And what is that RM4 billion for? It goes to the schools and hospitals,' he added. Anwar cited targeted aid initiatives such as the Rahmah Cash Aid (STR) and Sumbangan Asas Rahmah (SARA) as key examples of how public funds are being channelled back to those who need them most. 'What are we collecting billions in taxes for? As everyone knows, the total allocation for STR and SARA amounts to RM13 billion and benefits nine million people. 'So this is our reasoning, we collect these taxes and return them to the people,' he said. Anwar also said that the Ministries of Education and Health have received increased allocations in the current budget as part of efforts to enhance the country's education and healthcare systems. 'That's why in deciding on this matter, we need to look at it from a macro perspective. If we look at past budgets, there were some good elements, but the significant increase in allocations for health and education reflects our priorities,' he said. Earlier this month, the Ministry of Finance announced the implementation of revised SST rates and expanded scope of the Service Tax effective July 1, 2025 to strengthen the country's fiscal position by increasing revenue and broadening the tax base. However, the announcement has since faced criticism from various quarters, with calls to delay its implementation over concerns that it could worsen the cost of living and place additional pressure on small businesses amid fragile economic conditions.
Free Malaysia Today
18-06-2025
- Business
- Free Malaysia Today
Fiscal reforms aimed at boosting public finances, protecting low-income groups
Treasury secretary-general Johan Mahmood Merican assured the public that the government is working to ensure that essential daily goods remain unaffected by the expansion of the sales and service tax. (Facebook pic) PETALING JAYA : The government's fiscal reform efforts, including the sales and service tax (SST) and the rationalisation of electricity and diesel subsidies, are aimed at strengthening public finances while protecting low-income groups and key economic sectors. Treasury secretary-general Johan Mahmood Merican today acknowledged recent public discussions on the SST expansion and said that the government was working to ensure that essential daily goods remain unaffected, reported Bernama. Speaking at the Sasana Symposium 2025 hosted by Bank Negara Malaysia, Johan stressed the need to broaden the country's tax base to ensure sustainable expenditure as well as to meet growing demands for social protection and basic infrastructure. 'We need to increase our tax base as our tax-to-GDP (ratio) is about 12.5%, which is among the lowest in this region,' he said. 'How do we then try to approach it more progressively? It is the government that needs to provide additional funding.' Johan also emphasised the importance of targeted subsidies and assistance, saying that providing the same aid to both high- and low-income groups undermines equity. He highlighted the increase in government cash assistance, with Sumbangan Tunai Rahmah (STR) rising from RM10 billion in 2024 to RM13 billion this year, and the inclusion of Sumbangan Asas Rahmah. He said while a progressive wealth tax was appealing and aligned with Islamic principles such as zakat, it presented major challenges in terms of administration, enforcement, and data availability. He said that income and consumption taxes were easier to manage due to the regular and traceable transactions, whereas wealth was harder to assess and value. 'I think the real challenge – and it is not just a Malaysian issue – is that it is quite challenging to administer a wealth tax compared to an income tax,' he added. Last week, the finance ministry announced that zero tax rates would remain for essential goods, while a rate of 5% to 10% would be imposed on non-essential items from July 1. The scope of the service tax will be expanded to cover rental, leasing, construction, financial services, and private healthcare and education services. Under the new tax regime, a 6% service tax will be imposed on construction services for infrastructure, commercial, and industrial buildings if the taxable value exceeds RM1.5 million annually. The same rate applies to private healthcare, traditional and complementary medicine, and allied health services provided to foreigners, on service providers exceeding the RM1.5 million threshold. Services directly impacting Malaysians such as public and some private healthcare will continue to be exempted from the service tax.
