Egypt VAT Bill imminent
Egypt is expected to issue a Bill for the implementation of VAT by October.
Value Added Tax will replace the existing Sales Tax regime, which is currently levied at 10% for most supplies. There is limited opportunity to recover any Sales Tax incurred by manufacturers through he production chain, which is a major disinvestment to the sector. Egypt is keen to replicate the successes and plans of rival emerging economies such as Turkey, China and India.
A VAT rate of 10% would raise up to $5 billion per annum. However, it may lead to a one-off inflation rise of between 2% and 3%.
The introduction of VAT is seen as vital by the World Bank to help Egypt reduce subsidies on electricity and a high government deficit. A more simple, and fairer VAT regime would also encourage more compliance, and help reduce the ‘black market’, estimated by at 30% of GDP.
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