Egypt sets value added tax at 10%

Egyptian government has set the long-awaited value added tax (VAT) at a flat rate of 10 percent, according to the country’s sustainable development strategy for 2030 website launched Wednesday.

The VAT is planned to avoid tax evasion, as it will be applied to each member of the production chain of goods and services to the final retail stage, instead of the current sales tax that is imposed as a one-off on the final sale to the customers.

The VAT that the consumer pays when the product comes on the market applies to the cost of the product, minus the cost of the components that have already been taxed.

Imposing the VAT would have a one-time impact on prices of all goods excluding foods, raising them by between 0.5 and 2.5 percent, according to a previous statement from the finance ministry.

The bill is currently under review by the parliament and is one of the challenges to be presented by the government to the house of representatives.

The tax is part of the government’s fiscal reform programme, which also includes cuts to expensive energy subsidies and the introduction of other tax measures, with a goal of reducing the country’s ballooning deficit.

Egypt’s government hopes to raise tax revenues by around 30 billion Egyptian pounds upon the implementation of the new tax.