Egypt to consider VAT and income-tax reforms

Egypt will form a committee to amend its value-added tax law and the country will also work to draft a new income tax law this fiscal year, Finance Minister Mohamed Maait said on Monday.

Maait, speaking to reporters, gave no details on what changes would be sought to either law.

The VAT law is part of a reform programme that was the basis for a $12bn, three-year loan agreed with the International Monetary Fund in 2016.

It broadened the tax base in a country where the government struggles to collect income tax because of a large informal economy and widespread avoidance.

Introduced at 13 per cent for a year from September 2016 then raised to 14 per cent, it replaced a sales tax that economists say was distorting the market.

Maait gave no details on the committee, including when it would be formed or what amendments will be sought.

A document seen by Reuters shows the government aims to review the general rate of its value-added tax in the 2019/20 fiscal year that began on July 1.

Separately, the financial statement for the draft 2019/20 budget, distributed to lawmakers, showed that the review will include a list of exemptions from VAT “without affecting low-income people”.

The finance ministry had said in a statement in April that “the draft budget for 2019/20 does not aim to amend or increase taxes in general”.

Maait said the government collected 660 billion Egyptian pounds ($39.83bn) in taxes in the 2018/2019 financial year, up 16.6 per cent from the previous year at 566 billion Egyptian pounds.

Of total tax revenue collected in the 2018/2019 financial year, 309 billion Egyptian pounds came from VAT, the minister said.

The VAT is a composite tax levied on the difference between the cost price and the sale price of domestic and imported goods.

“We are seeking to draft a new income tax law during the current fiscal year,” Maait said.

“We will put forward the law’s initial draft within two months,” he said, but gave no further details.