Egypt is set to introduce Value Added Tax (VAT) this year after it announced that a bill which places VAT at 10 -12 percent will be finalized by the end of January.
The tax will be imposed on all goods; with the exclusion of a few subsidized foods including wheat and oil, and would replace the presently working Sales Tax, a report on Al-Ahram Arabic revealed.
“The tax rate will be higher on other goods including alcoholic beverages, cigarettes and cars. The VAT should replace the sales tax currently imposed on 17 goods and services,” head of the Income Tax Authority, Mamdouh Omar said at a conference during the weekend.
VAT is a form of consumption tax imposed on finished goods or service for the value added during the production stage (manufacturing to distribution). It is similar to personal income tax or corporate income tax in the sense that it is designed mostly to generate revenue for the government.
Cairo is keen on switching from Sales Tax to a more ‘efficient’ tax scheme, and believes the VAT will offer an effective medium of increasing its budget revenues.
According to Ahram Online, The North African country is expecting an additional $46 billion from tax revenues, bolstered by an increased sales tax inflow from LE83 billion ($11.9 billion) to LE126.5 billion ($18.2 billion) if VAT is fully implemented.
Although some analysts tag the tax scheme as ‘regressive’, explaining that it places greater burden on the poor, compared to an income tax which taxes individuals based on income levels.
“The VAT increase puts pressure on the poor. It is a regressive tax and leads to a redistribution of the wealth in the wrong direction,” said Mahmoud El-Khafif, a spokesman of the United Nations Conference on Trade and Development (UNCTAD).
Source: Ventures Africa