Egypt's President Abdel-Fattah El-Sisi has ratified the long-delayed introduction of the value-added tax (VAT), meaning that the Ministry of Finance will issue its bylaws within 30 days to put the law into action.
According to Article 9 of the VAT law, which Ahram Online obtained a copy of, the current law on the sales tax will remain in action until the new bylaws are issued within 30 days from its ratification.
Egypt’s parliament gave a final approval on August 28 to the implementation of the VAT at a rate of 13 percent for the 2016/17 fiscal year, to rise to 14 percent the following year.
The long awaited VAT law is part of the government's fiscal reform programme, implemented in July 2014, through which energy subsidies are being cut and new taxes are being introduced to reduce the country's ballooning budget deficit – estimated at 11.5 percent of GDP in fiscal year 2015/16.
Finance Minister Amr El-Garhy said in August that the law is expected to be implemented in October.
The VAT aims at reducing tax evasion, as it will be applied to each member of the production chain of goods and services, instead of the current sales tax that is imposed as a one-off on the final sale to customers.
The parliament also increased the list of exempted goods and services to 56 from 52 items; it includes local and imported medicine.
“The VAT is regarded as a consumer tax, which means those who consume a lot will pay more,” El-Garhy said earlier.
The minister said in July that the VAT may lead to price inflation ranging between 0.5 percent for low-income Egyptians and up to 2.3 percent for the upper class.
The government reform programme, which the VAT is part of, has been endorsed by the International Monetary Fund (IMF), leading to an initial agreement between the government and the global lender on a $12 billion fund facility over three years, which is expected to be approved by the fund's executive board in the coming weeks.
Egypt, which relies heavily on imports, particularly of foodstuffs, has been suffering a severe shortage of US dollars in the wake of political and security unrest that has scared off tourists and foreign investors, two major sources of hard currency.
