Oman becomes fourth GCC country to introduce VAT

A partial view of the area of Haramil in the Omani capital Muscat on September 18, 2020. (AFP)
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Updated 16 April 2021

Oman becomes fourth GCC country to introduce VAT

  • Tax starts April 16 at 5%
  • Zero-rated items include essential foodstuffs

OMAN: Oman introduced a 5 percent value-added tax (VAT) on Friday, the fourth Gulf Cooperation Council country to implement a so-called consumption tax.

It followed the UAE, Saudi Arabia and Bahrain. Saudi Arabia tripled its VAT rate to 15 percent last July to help fund its coronavirus relief efforts.

Oman has predicted it will raise OMR400 million ($1.04 billion) from the tax this year, equivalent to 1.5 percent of GDP, as it looks to narrow a widening fiscal deficit.

In June 2016, all six GCC states signed the Common VAT Agreement, pledging to introduce a 5% VAT rate. Kuwait’s parliament has pushed back the implementation date several times but the International Monetary Fund said last year that it expects it to be introduced by 2022. Qatar is expected to go ahead with VAT in the second or third quarter of this year and is said to be close to finalizing its tax administration system, Dhareeba.

Omanis had 6 months to prepare for the introduction of VAT, which may be followed by the Gulf’s first income tax in the coming years.

Goods and services exempt from VAT include financial services, health care, education, local passenger transport, bare land, resale of residential real estate and residential rents. Zero-rated goods and services include all exports, basic foodstuffs, medicine and medical equipment, investment in gold, silver and platinum, crude oil and derivatives and natural gas, among certain transport goods.


US economy contracts in first quarter; outlook fuzzy

Updated 30 June 2022

US economy contracts in first quarter; outlook fuzzy

  • Gross domestic product fell at a 1.6 percent annualized rate last quarter

WASHINGTON: The US economy contracted slightly more than previously estimated in the first quarter amid a record trade deficit and supply chain disruptions, government data showed on Wednesday.

The Commerce Department’s third estimate of gross domestic product also showed some under- lying softness in the economy, with consumer spending revised lower and inventories higher than reported last month. This does not bode well for domestic demand and the economic outlook amid recession jitters as the Federal Reserve aggressively tightens monetary policy to tame inflation.

“The biggest effect from this report is that it leaves inventories in a more overbuilt position than previously thought, putting second quarter GDP into negative territory pending what tomorrow’s data reveal about May consumption and consumer inflation and April revisions to the same,” said Chris Low, chief economist at FHN Financial in New York.

Gross domestic product fell at a 1.6 percent annualized rate last quarter, revised down from the 1.5 percent pace of decline reported last month. Economists polled by Reuters had forecast the pace of contraction would be unrevised at a 1.5 percent rate.

The economy was initially estimated to have contracted at a 1.4 percent rate. It grew at a robust 6.9 percent pace in the fourth quarter. GDP was 2.7 percent above its level in the fourth quarter of 2019.

Consumer spending, which accounts for more than two-thirds of the economy, grew at a 1.8 percent rate instead of the 3.1 percent pace reported last month. The downgrade reflected downward revisions to financial services and insurance as well as healthcare.

Spending on long-lasting goods like motor vehicles and recreational goods was revised lower.

Businesses accumulated inventories at a $188.5 billion rate, rather than the $149.6 billion rate reported last month. As a result, growth in final sales to private domestic purchasers, which excludes trade, inventories and government spending, was revised down to a 3 percent rate last quarter. This measure of domestic demand was previously reported to have risen at a 3.9 percent rate.

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QIA CEO says exploring opportunities in blockchain

Updated 28 June 2022

QIA CEO says exploring opportunities in blockchain

  • Qatar’s sovereign wealth fund chief says not interested in crypto investment

DUBAI: The chief executive of Qatar Investment Authority said on Tuesday that the sovereign wealth fund is not interested in crypto investments but it is exploring opportunities in blockchain.

Mansoor bin Ebrahim Al-Mahmoud was speaking at the Qatar Economic Forum organized by Bloomberg.

The $300 billion sovereign wealth fund owns stakes in Credit Suisse and Volkswagen AG as part of its European portfolio.

Russian exemption

On the other hand, Russian lawmakers approved a draft law that would potentially exempt issuers of digital assets and cryptocurrencies from value-added tax.

Russia has long voiced skepticism of cryptocurrencies and other digital assets, with the central bank citing concerns over financial stability.

But in February the regulator gave blockchain platform Atomyze Russia the first license to exchange digital assets. A license for dominant lender Sberbank soon followed.

Unprecedented Western sanctions have hit the heart of Russia’s financial system over events in Ukraine and lawmakers have scrabbled to bring in new legislation to soften the blow.

The draft law, approved by State Duma members in the second and third readings on Tuesday, envisages exemptions on value-added tax for issuers of digital assets and information systems operators involved in their issue.

It also establishes tax rates on income earned from the sale of digital assets.

The current rate on transactions is 20 percent, the same as for standard assets. Under the new law, the tax would be 13 percent for Russian companies and 15 percent for foreign ones.

The draft must still be reviewed by the upper house and signed by President Vladimir Putin to become law.

Bitcoin miners

Bitcoin miners have been forced to tap into their cryptocurrency stashes as a plunge in prices, rising energy costs and increased competition bite into profitability.

The number of coins miners are sending to crypto exchanges has been steadily climbing since June 7, researchers at MacroHive noted, in a sign that “miners have been increasingly liquidating their coins on exchanges.”

Several publicly listed bitcoin miners collectively sold more than 100 percent of their entire output in May as the value of bitcoin tumbled 45 percent, an analysis by Arcane Research found.

“The plummeting profitability of mining forced these miners to increase their selling rate to more than 100 percent of their output in May. The conditions have worsened in June, meaning they are likely selling even more,” said Arcane analyst Jaran Mellerud.

The crypto mining space rapidly expanded in 2021 as bitcoin more than quadrupled in value, but this growth has further pressured margins as the process is designed to grow more difficult as the number of miners increases.

“Over the past six months, hash rate and mining difficulty have increased while the price of bitcoin has dropped. These are both negatives for existing miners as both work to compress margins,” said Joe Burnett, analyst at bitcoin mining firm Blockware Solutions.

High energy prices are also hitting miners, which by some estimates use more electricity than the Philippines, according to the Cambridge Bitcoin Electricity Consumption Index.

“If you’re not at a very low-cost electricity area at this point, you’ve got to shut down,” noted Chris Brendler, senior research analyst at D.A. Davidson.

Daily trading

Bitcoin, the leading cryptocurrency internationally, traded lower on Tuesday, falling by 1.77 percent to $20,811.95 as of 9:15 a.m. Riyadh time.

Ethereum, the second most traded cryptocurrency, was priced at $1,192.89 falling by 1.73 percent, according to data from CoinDesk.

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G7 considering ways of capping Russian oil price — German official

Updated 26 June 2022

G7 considering ways of capping Russian oil price — German official

  • The proposal is part of broader G7 discussions on how to further crank up the pressure on the Kremlin over its invasion of Ukraine without stoking global inflationary pressures

SCHLOSS ELMAU, Germany: Leaders of the Group of Seven rich democracies are having “very constructive” discussions on a possible cap on Russian oil imports, a German government official said on Saturday shortly before the start of the annual three-day G7 summit.
The proposal is part of broader G7 discussions on how to further crank up the pressure on the Kremlin over its invasion of Ukraine without stoking global inflationary pressures.
The Ukraine war, energy and food shortages and the darkening global economic outlook are expected to dominate the agenda of the summit that is taking place this year in Schloss Elmau, an alpine castle resort in southern Germany.
The United States, Canada and Britain have already banned imports of Russian oil while European Union leaders have agreed an embargo that will take full effect by end-2022 as part of sanctions on the Kremlin over its invasion of Ukraine.
With energy prices soaring though, the West fears such embargoes will not actually put a dent in Russia’s war chest as the country earns more from exports even as volumes fall.
A price cap could solve that dilemma, while also avoiding further restricting oil supply and fueling inflation, officials say, but for it to work, it requires buy-in from heavy importers like India and China.
“We are on a good path to reach an agreement,” the official said.
The official said the G7 was also discussing the need to combine ambitious climate goals with the need for some countries to explore new gas fields as Europe rushed to wean itself off Russian gas imports.


Inflation sparks global wave of protests for higher pay

Updated 25 June 2022

Inflation sparks global wave of protests for higher pay

  • Economists say Russia’s war in Ukraine amplified inflation by further pushing up the cost of energy

NEW YORK: Rising food costs. Soaring fuel bills. Wages that are not keeping pace. Inflation is plundering people’s wallets, sparking a wave of protests and workers’ strikes around the world.

This week alone saw protests by the political opposition in Pakistan, nurses in Zimbabwe, unionized workers in Belgium, railway workers in Britain, Indigenous people in Ecuador, hundreds of US pilots and some European airline workers. Sri Lanka’s prime minister declared an economic collapse Wednesday after weeks of political turmoil.

Economists say Russia’s war in Ukraine amplified inflation by further pushing up the cost of energy and prices of fertilizer, grains and cooking oils as farmers struggle to grow and export crops in one of the world’s key agricultural regions.

As prices rise, inflation threatens to exacerbate inequalities and widen the gap between billions of people struggling to cover their costs and those who are able to keep spending.

“We are not all in this together,” said Matt Grainger, head of inequality policy at antipoverty organization Oxfam. “How many of the richest even know what a loaf of bread costs? They don’t really, they just absorb the prices.”

Oxfam is calling on the Group of 7 leading industrialized nations, which are holding their annual summit this weekend in Germany, to provide debt relief to developing economies and to tax corporations on excess profits.

“This isn’t just a standalone crisis. It’s coming off the back of an appalling pandemic that fueled increased inequality worldwide,” Grainger said. “I think we will see more and more protests.”

The demonstrations have caught the attention of governments, which have responded to soaring consumer prices with support measures like expanded subsidies for utility bills and cuts to fuel taxes. Often, that offers little relief because energy markets are volatile. Central banks are trying to ease inflation by raising interest rates.

Meanwhile, striking workers have pressured employers to engage in talks on raising wages to keep up with rising prices.

Eddie Dempsey, a senior official with Britain’s Rail, Maritime and Transport Union, which brought UK train services to a near standstill with strikes this week, said there are going to be more demands for pay increases across other sectors.

“It’s about time Britain had a pay rise. Wages have been falling for 30 years and corporate profits have been going through the roof,” Dempsey said.

Last week, thousands of truckers in South Korea ended an eight-day strike that caused shipment delays as they called for minimum wage guarantees amid soaring fuel prices.

Months earlier, some 10,000 kilometers (6,200 miles) away, truckers in Spain went on strike to protest fuel prices.

Peru’s government imposed a brief curfew after protests against fuel and food prices turned violent in April. Truckers and other transport workers also had gone on strike and blocked key highways.

Protests over the cost of living ousted Sri Lanka’s prime minister last month. Middle-class families say they’re forced to skip meals because of the island nation’s economic crisis, prompting them to contemplate leaving the country altogether.

The situation is particularly dire for refugees and the poor in conflict areas such as Afghanistan, Yemen, Myanmar and Haiti, where fighting has forced people to flee their homes and rely on aid organizations, themselves struggling to raise money.

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Boeing expects demand to be back to pre-pandemic levels by 2024, says top official

Updated 26 June 2022

Boeing expects demand to be back to pre-pandemic levels by 2024, says top official

DOHA: Boeing anticipates global demand to see about 4 percent annual growth year over year for the next two decades, expecting to be back to pre-pandemic levels by 2024, said Omar Arekat, the company’s Middle East and Africa VP of commercial sales and marketing. He added that the growth for the Middle East would be slightly above that at 4.2 percent year over year.

During the Annual General Meeting of the International Air Transport Association, Arekat told Arab News that the market is growing, and there is a demand for roughly 3,000 cargo and freighters in the Gulf Cooperation Council region.

“We see that there is a recovery coming and our market is a very resilient market,” he added.

Despite a recovery, Boeing is still not quite at pre-pandemic levels, Arekat said. “We are seeing the recovery move much quicker than anticipated, especially on the regional and domestic fronts,” he informed.

Airlines returned to almost 100 percent of their operational capacity for regional and domestic travel, Arekat said. Internationally, it is growing, but it isn’t completely there yet, he added.

Based on peak season base, Boeing is 70 to 75 percent behind 2019, Arekat said.

He believed that the GCC is doing better than the rest of the world in terms of recovery. There has been strong growth in intra-regional travel, and international travel is increasing quickly, he said. “So we anticipate that we would see a recovery to 2019 levels by the year 2024,” Arekat added.

According to Arekat, the GCC region and the Middle East are important markets for Boeing.

Boeing and Qatar Airways signed a Memorandum of Understanding earlier this year for the purchase of up to 50 Boeing 737 Max aircraft, he said, adding that by 2024, the aircraft will begin being delivered.

“Qatar Airways announced a MoU for the purchase of 25 Boeing 737 Max with an option for another 25,” he said.

Arekat informed that Qatar Airways was the launch customer for 777-8 Freighter with a firm order for 34 jets earlier this year.

Boeing is currently working with Saudi Arabia on different opportunities. “The Saudi market has a lot of potential for growth,” he added.

Being a pioneer in sustainability, Boeing also plans to add the Boeing 777-200 to the sustainability program in 2023, he said. The company also has the Boeing 737 Max, which runs on sustainable fuel, and Etihad’s Boeing 787, the Greenliner. Boeing has been investing continuously in expanding its fuel-testing platform and leads the way in that area, he concluded.

“It’s in early stages right now and the demand will grow but the focus right now is on making sure that it’s affordable, and it’s available and produced widely,” he said.

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