Article 57 of the Basic Law specifies a number of provisions related to financial laws in the country concerning tax collection, maintenance of state property, establishment of the general budget, supplementary budget, and settlement of accounts, control over state finances, and loans pertaining to the state. Article 39 of the Basic Law stipulates that payment of taxes is a legal duty. Income taxes, however, are not imposed on individuals. The top corporate tax rate is 12 percent. The Finance Law, Royal Decree 47 of 1998, assigns the Ministry of Finance the task of collecting, processing, and disseminating all fiscal data, and the ministry published the 2005 budget online (www.mof.gov.om). Reforms are underway in consultation with the IMF to render country’s finances more transparent by disclosing off budget expenditures or parastatals and local government. Oil and gas revenues accounted for 74% of government revenue in 2005. Oil production has fallen consistently in Oman since 2001 by approximately 4-6% each year, but new oil discoveries are expected to restore production to 2001 levels by 2007. Meanwhile, Oman is attempting to diversify government revenue through investment in other resources, such as natural gas. New taxes are also under consideration.
State auditing institutions in Oman originated in Oman prior to 1970. The office became an independent department of the Ministry of Diwan Affairs in 1974; in 1981, its status was raised to that of Directorate General, and elevated yet again in 1985 through Royal Decree No. 36/85, which established a state audit mandate. In its present form, the State Audit Institution was established in 2000 by Royal Decree 55, superceding the Royal Decree 129/21. The new State Audit Law authorizes the State Audit Institution to investigate a broad sweep of public agencies, including the state administrative apparatus, government entities and departments, and private institutions that receive government assistance. In addition to these roles, it monitors projects of the state-led Development Plan. The head of this organization, appointed by Royal Decree, is joined by a Deputy Secretary General and two Directors General. The organization currently has 154 employees and a budget of roughly $7 million. Moreover, the SGSA is currently conducting a research study on how supreme audit institutions in the region can use Intranets to improve information flows. Furthermore, the SGSA is part of the International Organisation of Supreme Audit Institutions (INTOSAI), a professional organization of auditors general of countries belonging to the United Nations.
The Diwan of Legislation, established in 1975 to review all laws and to draft royal decrees, international agreements and government contracts, also scrutinizes any contract committing the government to expenditure of over RO 500,000 ($1.3 million).
The Central Bank of Oman, established by a Royal Decree promulgated in December 1974 in accordance with provisions defined in the Banking Law of 1974, issues currency, launches developmental bonds, disseminates statistical information, and supervises banking practices in the country. A banking law introduced new lending limits to the shareholders of commercial banks in late 2000 and increased the Central Bank’s supervisory powers. There were fourteen commercial banks in Oman, five of local origin, with a total of 330 branches at the end of 2004, along with three specialized banks with their 26 branches. The Central Bank promoted annual bankers meetings, beginning in 2005, to make its supervision more transparent in accordance with international standards.
The sultan issued Royal Decree No. 34, the Money Laundering Law, on March 27, 2002. The law establishes a National Committee for Combating Money Laundering under the chairmanship of the Under Secretary of the Ministry of National Economy for Economic Affairs. Notwithstanding other laws protecting the confidentiality of banking transactions, bankers are ordered to report any suspicious laundering activities to the police and to the Central Bank authorities and to do so without alerting their client. The public prosecution may freeze any transaction suspected of being illegal for up to ten days. Any person convicted of money laundering is to be jailed for three to ten years, and bankers who do not comply with the law are also subject to jail sentences. Oman was a founding member in 2004 of the Middle East and North Africa Financial Action Task Force (MENAFATF), a part of the global network to combat money laundering and terrorist financing.
The large capital costs associated with provision of power and desalinated water made this sector the early focus of the government’s privatization drive. The current five-year plan makes clear that private investment in a number of gas-based projects is essential if the plan is to succeed. Those plans suggest total private investment of about $11.4 billion in the Omani economy between 2001 and 2006, compared with an estimated $4.9 billion between 1996 and 2000.
Established by Royal Decree No. 53 of 1988, the Muscat Securities Market was reorganized in November 1998. Royal Decree No. 80/98 established a separate Capital Market Authority, in accord with international practice, to regulate the MSM under the authority of the Ministry of Commerce and Industry. The Authority is charged with enforcing standards for annual and quarterly financial reports and working to detect fraud and malpractice.
At the end of 2004, 96 companies were listed, and foreign investment was encouraged. Roughly 18% of market capitalization on the MSM was foreign-owned, with banks and insurance companies accounting for much of it, with cross-listing arrangements with Kuwait and Bahrain. Market capitalization totaled over $6.3 billion, and turnover ratio of traded stock during 2004 was 31%. Electronic share trading was introduced in 1998 and Oman was included on the International Finance Corporation’s emerging market index in 1999. The Muscat Depository and Securities Registration Company, the SAOC, is another regulatory body for the stock exchange. It is a closed corporation, 60% owned by those members who have contributed to its capital, and 40% owned in the exchange. This entity also governs depository and transfer functions for the MSM. It updates, maintains, and reports the records of share ownership.
There are currently no independent financial institutes in Oman.
International Transparency Standards
Oman has participated in the IMF’s General Data Dissemination System since 2001.