Egypt: Egyptian VAT Still On The Table
29 August 2013
Posted by: Author: Lorys Charalambous
Author: Lorys Charalambous
Egyptian Finance Minister, Dr Ahmed Galal has reiterated his commitment to seeing a value-added tax (VAT) installed to boost the equity of the tax system.
Speaking on August 23, 2013, Galal said that the introduction of a value-added tax, under discussion for several years, would lead to a fairer distribution of tax, add services to the tax base, and boost businesses' and in particular exporters' competitiveness by allowing input tax credits.
Earlier it was suggested that the value-added tax regime should be structured under a 10 percent rate, replacing sales tax rates that have ranged from 5 to 45 percent. Rate concessions, and potentially exemptions, would be provided for essential commodities and services, such as some edible goods, and health, education and social services.
Galal announced that consultations and education programs will be launched, engaging with the public and private sector, and the tax authority will prepare the necessary infrastructure to administer the regime.
Discussions concerning the introduction of value-added tax peaked in 2012, when the nation continued discussions on structural reforms as part of securing a long-discussed financial assistance package with the International Monetary Fund.
A loan worth some USD4.8bn, first discussed in 2011, has been deferred. The IMF has stated that negotiations will recommence when Egypt regains political stability. Despite the installation of an interim Government, it is thought likely loan talks will be shelved until parliamentary elections are held, potentially before the end of this year.
Earlier, the IMF underscored the importance of VAT for Egypt, stating: "A number of fundamental structural reforms, including the transition to a VAT-like consumption tax and reform of the highly inequitable and costly system of subsidies, are needed to improve the efficiency of public spending and help reduce the fiscal deficit in the medium term."