Saturday, May 3, 2008

News on Oman's secret cyclone, our new taxation plan, and naughty Iranians

The International Monetary Fund, or IMF, just released its latest annual Public Information Note [PIN] following discussions with the Oman Government. Apart from the stuff about banking and inflation, and how the Government needs to use fiscal policy to control it (ie the Government needs to rein back its growth in spending), there were two real nuggets.

The first highlights the very strange way last year's Cyclone Gonu is reported here.

Here’s the Oman Press version of the opening paragraph, as printed in the outstanding Times of Oman
IMF Praise for Oman growth
Oman’s economic performance during 2007 was strong. The economy withstood well the impact of last year’s unusual weather conditions and real GDP grew by 6.4 per cent, supported by high oil prices and rapid growth of non-hydrocarbon sectors such as petrochemicals, trade, and transport and communications, the International Monetary Fund (IMF) said in a recent report on Oman.

Well, actually, that’s not quite true, is it Times Of Oman, because that’s not what the International Monetary Fund (IMF) actually said in their recent report on Oman. Here’s the IMF version
Oman's economic performance during 2007 was strong. The economy withstood well the impact of the June cyclone and real GDP grew by 6.4 percent, supported by high oil prices and rapid growth of non-hydrocarbon sectors such as petrochemicals, trade, and transport and communications.

Note how The Times (and all other Omani papers) have changed June Cyclone to last year’s unusual weather conditions? It was always a bit Orwellian how, sometime later last year, all mention of a cyclone, Gonu, and the cause of the damage it did was replaced with the magically semantic phrase unusual weather.

The second piece, again totally unhighlighted by Oman’s extremely perceptive press corps, was that Oman is apparently planning to institute a value added taxation system.
Directors called on the authorities to restrain the growth of wages and transfers, phase the implementation of lower-priority projects. They encouraged the authorities to reduce over time the implied subsidy on petroleum products, and supported efforts to increase non-oil revenues through the introduction of a value-added tax.

Hmmm. A value added tax, also known as a goods and services tax, will be extremely regressive. That means that families who spend most of their income will face a much higher effective marginal tax rate than rich families who either save and invest money or spend it overseas. Perhaps Oman will choose to implement a more distorting (and more expensive to administer) VAT whereby food for example is excluded. Lets see. But interesting that we have to find out about this through the IMF...

Iranians caught supplying Iraqis with arms.
Well, no surprise there I guess. The Americans have been claiming since last year that the road-side explosive devices being used had reached levels of sophistication that indicated Iranian military support. It will be interesting to see how the Gulf countries react to clear proof of active Iranian support for the insurgency in Iraq.

Iraq shows proof of Iranian support for militants

BAGHDAD An Iraqi delegation in Iran has confronted Iranian security officials with evidence that Teheran is providing support for militias battling Iraqi government forces, an Iraqi official said on Friday.

"They presented a list of names, training camps and cells linked to Iran," Haidar Al Ibadi, a member of Iraqi Prime Minister Nuri Al Maliki's Dawa party, said.

"The Iranians did not confess or admit anything. They claim they are not intervening in Iraq and they feel they are being unfairly blamed for everything going on Iraq," he said of the talks, which took place on Thursday. Ibadi said he had been in contact with the delegation.

Washington has long accused Teheran of backing militias, particularly cleric Moqtada Al Sadr's Mahdi Army, providing them with weapons, funding and training. It has displayed some of the weapons, including rockets and mortars.

The Iraqi government, however, has generally been more restrained in its criticism of its neighbour, which denies the charges and says it supports the government.

The US military said this week that "very, very significant" amounts of Iranian weaponry had been found in Basra and Baghdad during offensive against militants. Some of those arms were made in 2008, a senior US military official said on Friday.

The official, who spoke on condition of anonymity, said there had been a "sea change" in Baghdad's view of Iranian activity in Iraq since the discovery of the weapons.

"Basra changed it for the Iraqis. I'm not sure they believed it before. But they went to Basra and saw it first hand," he said.


  1. Just to clarify…

    *The newspapers are supplied with official stories from Oman News Agency…hence the same tone in all the papers.

    *Ministry of Information wants Gonu to be referred to as “unusual weather conditions”

  2. What about a 'Blue City' tax as well as VAT one? Also, what about an 'unusual weather' tax? If we have all of these taxes we can then carry on building in the wadis, as insurance is actually possible for 'unusual weather' patterns. Anyway, that's what all this TAX is for is it not? Its not to make anyone rich is it? Oman is also a nation of shop keepers, and so can anyone tell me that we can see them doing VAT returns? Ahmed

  3. Well well well.....

    I wonder what kind of tax level they will implement. I think its inevitable that a VAT style tax will be introduced, Oman needs to secure a reliable source of income outside of Oil and a % sales tax seems like a good way to earn it. Of course when it is brought in, prices will be rounded up, tax will not be correctly reported, and tax evasion will be rife. If this kind of tax is brought in, an entirely new ministry will need to be setup and linked in to every bank and such. Even then, how many accountants are there in Oman? How will tax funds be allocated? Muscat tax payers paying for work being done in the Interior may not go down so well for people who have to deal problems in their own back yard. It'll happen sometime I guess, I just hope that when it does happen, it is done properly, and much more important, ENFORCED. ROP dont enforce the roads enough and look at all the accidents and casualties there.

    Lets not forget that VAT is a consumer tax, so people buying materials for construction for example, should be tax exempt. Perhaps a higher import duty on imported goods would be a better way to go. Easier to enforce and would do the secondary function of promoting Omani products through lesser price at the same time. Sort of an Omani product equivalency tax. Is that a pig I just saw flying?!

    Not surprised about those cheeky iranians, I cant figure out why Iraq is just letting them get away with it. Terrible business, wish it would end already :(

  4. The Iranians are trying to prepare for the coming of the Mahdi (hence the 'Mahdi Army') just like the neo-con evangelical christians are helping the Israelis in order to prepare for the coming of the Messiah in Jerusalem....bunch of nutcases

  5. The VAT is a GCC initiative. They agreed a few years ago to initiate a VAT in all GCC countries and the UAE was requested to come up with the blueprint. In fact UAE is supposed to be the test bed for the VAT before other GCC countries follow.

    It doesn't make sense when our government are basically raking in the money, but then again how often do things make sense this part of the world?

  6. Well, they're raking in the money now, but they're also spending a lot of it too.

    New roads and highways, not just around muscat, new hospitals, ROP bases, schools, sewerage networks, desalinization plants, power plants, universities (SQU and Dhofar) and lots more...

    Granted they're still raking it in, but to implent taxation is something they will have to do in order to provide better services for their citizens in the long run. But what would be nice to see is that revenues generated from the VAT would be ear-marked for various developments, be it healthcare or education or road maintenance and such.

  7. Jerry,
    Did they send a memo? Doesn't anyone else find this unusual weather thing... really wierd?

    Anon. yeah, avoidance would be huge. Although a big advantage of a VAT tax is that businesses can claim back the VAT on the stuff they buy. That encourages self enforcement.

    Lurker, Muscati
    I think they do need some tax structures, and VAT would be OK if they also act to compensate the lower earners, including the Expats. Because they don't totally need the money, nows a good time. It would get the systems in place, and they can always bump up the rate in future.
    And yes, the IMF have been banging on about this for a while I noticed after reading a bit deeper, and nothings happened so, perhaps its not going to actually happen at all.

    A wealth tax, or an income tax would be good too. But there's that old 'no taxation without representation' problem. Maybe thats one reason a VAT tax is popular with the politicos - it minimises that issue.

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  9. Talking of road building, can someone tell me why Oman doesnt have 'safe' central reservation crash barriers on its motorways? They're all made of concrete, which are obviously partly responsible for the horrificly high car accident fatality rates. Next time you drive in Oman look at the number of scrape marks along the central concrete barriers. It would only take metal crumple barriers to reduce car accident fatalities, road blocks, clear up operations and the ensuing chaos.

    Not only that, but the concrete blocks obstruct vision and also potentially obstruct drainage.

    These are the basics of design I learnt in my master-planning or earlier in my career as an engineer. Either the powers that be arent being advised properly or theyre happy with the current situation as part of a beautification process.


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