Egypt offers lottery and discounts to promote new value-added tax

Ahram Online , Saturday 5 Sep 2015

Hany Kadry Dimian
Egypt's Finance Minister Hany Qadry (Photo: AP)

Egypt's finance ministry will issue lottery prizes in order to motivate businesses to issue receipts and citizens to demand them, to promote popular observation of the soon-to-be imposed value-added tax.

The ministry said in a statement on Saturday that it would hold a monthly lottery benefiting up to a thousand citizens from each governorate, with annual prizes valued at a total of LE5 million.

The statement did not give further details about the operation of the lottery.

The date of implementation of the long-awaited value-added tax has not yet been announced, but Finance Minister Hani Qadri Dimian told Reuters last week that the law establishing the tax would be approved by the cabinet “within weeks.”

As an additional measure to support the introduction of the tax, the government will also implement a temporary 5 percent discount on the total value-added tax paid for goods, and a 15 percent discount on taxes paid for services.

The new tax will be imposed on each additional stage in the production process, to ultimately distribute the tax over all contributors to a final product.

The long-delayed tax will set a fixed rate on the consumption of most goods and services, with the exception of socially sensitive goods and services, such as some food products. 

The ministry, however, expects a “one-time and minimal” rise in general price levels.

The amendments also keep the sales tax rate on automotives unchanged.

By implementing the tax, the government aims to raise the competitiveness of Egyptian industry by deducting the value of taxes on inputs from their tax obligations, as well as to integrate unregistered businesses into the formal economy, said the statement.

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

Egypt expects LE422.4 billion ($54 billion) in tax revenues in the current fiscal year ending in July 2016, up from LE267 billion ($34 billion) collected in the previous fiscal year.

The finance ministry estimated earlier this year that VAT could raise tax revenues by around LE32 billion ($4.1 billion).

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