Oman is planning to introduce a value added tax (VAT) as part of a government drive to cut its reliance on oil and could bring in the measure as early as next year, a government official said on Monday.

'VAT is certainly on the cards and it can come as early as next year,' said a ministry of commerce official, who did not want to be identified. 'The government needs to boost its financial apparatus to reduce reliance on oil revenue.'

The government relies on oil for about 70 per cent of its income. The maximum VAT rate would be 5 per cent and apply to 'general goods', except in health, said the official, without being more specific.

The rate is capped 'in consideration of prevailing inflation,' the official told Reuters on the sidelines of a conference in the Omani capital, Muscat.

Annual inflation in Oman accelerated to 11.56 percent in March from 11.11 percent in February, its highest level in at least 18 years, government data showed this month.

'VAT is definitely happening in Oman and we are sounding out all our clients to prepare for it,' Michael Armstrong, managing partner of KPMG, said.-Reuters