Egypt reopens VAT implementation discussions
The Egyptian Finance Ministry has re-started discussions on the potential implementation of a full Value Added Tax regime to replace the existing sales tax system.
Egyptian Sales Tax outdated
The current Egyptian sales tax is complex and can led to compound taxation. Whilst there are some deductions allowable for input tax suffered, this only applies on the sale of goods. Exporters may also claim refunds on sales tax.
The principle tax rate is 10%. However, there are many other rates, ranging from 5% to 45% on cars, certain imports and supplies for the construction industry.
IMF loan pushes reform
Egypt is keen to secure a €4bn loan from the International Monetary Fund (IMF). In return, the IMF is looking for a reform of the tax system. It views the current Sales Tax as holding back exporters, and only having a narrow base of taxation. This can distort trade, and creates a sense of inequality about the tax.
The IMF has this week sent a team of VAT experts to advise the Finance Ministry on an implementation plan and timetable. There is a similar programme for Pakistan VAT reform, also tied to developmental loans from.