VAT- free Goods & Services

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newcastle
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VAT- free Goods & Services

Post by newcastle » Sat May 21, 2016 5:02 pm

Egypt's finance ministry has listed 52 commodities and services that will be exempted from a new value-added tax (VAT), which is expected to be applied this year after it is approved by parliament.
According to a ministry statement emailed to press on Friday, the exemption list will include all essential food goods and dairy products, in addition to babies’ milk and their nutritional supplements.

Foods that are sold to consumers through shops and restaurants without touristic licences will also be free of VAT, the statement said.

Look like your average poor Luxorian won't be hit too hard. I don't imagine they frequent restaurants with a touristic licence either.

http://www.amwalalghad.com/en/?tmpl=com ... t&id=46189



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Re: VAT- free Goods & Services

Post by carrie » Sat May 21, 2016 5:15 pm

Another knock back for those who have spent the money and taken the trouble to get one though.

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Re: VAT- free Goods & Services

Post by Hafiz » Sat May 21, 2016 5:57 pm

A fuller but still partial list of the 52 exemptions is at: http://english.ahram.org.eg/NewsContent ... -and-.aspx.

The published exemptions include crude, natural gas, butane, electricity, education, most or all food (except touristic) and banking services. Some or all leases may be exempt.

Don’t quite understand how the food exemption will work in practice. If, say, any of the cost inputs to food production like irrigation water, pesticides, herbicides, farm equipment like ploughs and tractors and phosphates were taxed wouldn’t that add to the cost of food? Same with the cost inputs to the manufacture of baby food products.

Egypt has announced a VAT twice over the past 25 years and backtracked both times because of protests. For a general background on the history of the VAT, the governments other tax reforms – a new capital gains tax no less which the big end of town has got deferred, a new 7.5% reduction in corporate taxes which surprisingly went ahead - recent backtracking on withdrawing subsidies and how the informal economy will be taxed for the first time: http://www.thenational.ae/business/econ ... al-deficit. and http://www.thenational.ae/business/econ ... mic-reform. These articles also make the point that the government has been generally indecisive on economics and finance.

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Re: VAT- free Goods & Services

Post by newcastle » Sat May 21, 2016 8:17 pm

A business where VAT is incurred on services, capital expenditure etc., if it is a business involved in the provision of exempted items, would simply seek repayment of that input VAT.....having no output VAT against which to offset it.

Thus there should be no upward pressure on food prices generally ...at least not as a result of VAT :urm:

Touristic businesses (or, more likely, their customers!) will, however feel the full brunt (less any input VAT incurred by the business).

But then tourists are rich and can afford to pay more :mo

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Re: VAT- free Goods & Services

Post by Hafiz » Sun May 22, 2016 10:19 am

Ok

But my point is how would it work in a country like Egypt with its particular administrative problems. With millions of exemptions the system could become an April Fools Day for a new army of bureaucrats to administer as well providing enticing opportunities for ‘avoidance’. For example, what happens when your VAT liable tractor is only used part time for food production? Who decides how much VAT is payable on the purchase price of the tractor and do you have to ‘pay’ for that decision? Wherever there is discretion there is a chance of a bribe. However the real issue isn’t about your average farmer but how discretions will be used when it comes to ‘connected’ businesses and the resurgent and unrepentant felool.

Most countries tried to wrestle with these inevitable administrative problems with only New Zealand going for near universal coverage of products and services – including food - because of its administrative efficiency and anti-avoidance effect. They compensate the less well off by varying the tax scales. Simple, equitable and cheap to administer.

With the Egyptian track record in bureaucracy, corruption and ‘avoidance’ you would think that the simplest, cheapest to administer system that minimized opportunities for corruption or red tape would be the way to go. Complicated European systems of partial exemption might not work well in Egypt. But what do I know. Maybe administering the VAT will become the big make work program to soak up all those pesky unemployed graduates, get them off the streets and engaged in ‘productive’ work. Only problem might be that costs of collection might exceed revenue collected. and crushing red tape will increase

Others have posted Transparency International’s local polling which says that 76% of Egyptians believe public officials are corrupt or extremely corrupt with 64% saying that corruption has increased over the past two years, so I guess you wouldn’t want to deliberately add to the temptations available to them and no one can say they don’t know their modus operandi in advance. Dracula and the blood bank comes to mind.

Maybe corruption explains some recent spectacular failures on the revenue side with the new, and relatively simple to administer, real estate tax raising only 25% of its estimate. Not a good result but could be just incompetence or over-optimism. Whatever the cause a warning for the VAT administration.

An afterthought. Military commercial businesses are currently tax, including company tax, exempt and import restrictions exempt. http://carnegieendowment.org/2014/06/24 ... s-in-egypt. Will they be VAT exempt or will they now be burdened with the necessity of providing some tax revenue for Egyptian citizens?

Failed to mention in the earlier post that, added to the backtracking on new taxes on the rich, was the reversal/delay/cancellation (?) of a 5% ‘rich tax’ (on incomes over Egy1 million) first announced in 2015. Oh well. they need all the breaks they can get - although there does seem to be a pattern emerging here http://www.ngage-consulting.com/downloa ... Report.pdf

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Re: VAT- free Goods & Services

Post by Major Thom » Sun May 22, 2016 2:33 pm

Has VAT already started on food? White oats went up 10le in 2 weeks, dig biscuits went up 20le in two weeks. I see some shops are trying to help with prices like KZ virtually now only stocking Tammy's breakfast cereal, but Tammy's are cheap and taste of cardboard. Plenty of. Shops are changing from good food products to cheap non neutritional products, trying to keep sales going. At one time we would only use one shop for everything on shopping day, now we have to visit four, to get quality food.

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Re: VAT- free Goods & Services

Post by newcastle » Sun May 22, 2016 2:40 pm

I share your misgivings Hafiz.

Who wouldn't....other than a dyed-in -the-wool , head-in- the-sand, regime lackey .

The VAT is being introduced to improve the chances of getting international finance but, if the IMF et al have learnt anything from the Greek debacle, it's that putting tax legislation on the statutes, and collecting it, are two completely different matters.

In terms of probity and clarity, Egypt makes Greece look like a text book model of excellence.

I wonder where the figure of 35billion EGP for prospective VAT revenues came from?

Possibly 7 & 5, the president's favourite numbers, multiplied, add 9 zeros for luck?

I'm sure, despite the government collecting a fraction of this figure, prices will rise across the board with the excuse of "it's because of the VAT"...irrespective of whether the vendor is incurring any.

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Re: VAT- free Goods & Services

Post by Dusak » Mon May 23, 2016 6:31 am

I doubt that it would affect us that much as we have been paying the Vendor Added Tax for many years now. :lol:
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Re: VAT- free Goods & Services

Post by Major Thom » Mon May 23, 2016 6:48 am

I think Dusak means R.O.T., "Rip Off Tax"

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Re: VAT- free Goods & Services

Post by Hafiz » Sun Jul 03, 2016 7:10 pm

Tax policy is a bit of an acquired taste – unfortunately I have the taste. Its not as boring as it sounds and it affects the real world

Here is a June 15 2016 article on the proposed Egyptian VAT from an UAE business newspaper written by a western journalist, Patrick Werr, who has been resident in Cairo for 25 years. I find his articles on Egyptian finance and economics clear, non-technical and balanced.

His view is that, given inflation, this is not a good time to implement a VAT. Poor business confidence is another reason for delay.

He points to the current woeful collection of existing taxes and the possibility of improving that as an alternative.

In the current economic climate he hypothesizes that the tax may not collect much.

Income taxes are low in Egypt – particularly low for the well off. 22.5 per cent for individuals recently reduced from 25.

There is a long background of Egyptian dithering on proposed tax reform in Egypt going back to the early 90’s IMF deal. (All those who claim that the IMF sets the rules forget that Egypt has implemented little of this deal. Another example is the failure of Egypt to act on monopolies such as the state dominated banking and insurance systems.)

http://www.thenational.ae/business/econ ... onomy#full

Werr also travels around Egypt and recently covered a new and promising gold mining venture north east of Luxor. So, for MT, this is a positive example of new investment in Upper Egypt. Unfortunately government red tape and internationally uncompetitive tax make life difficult for Egyptian miners and, allegedly, retard investment. http://www.thenational.ae/business/econ ... -resources and http://www.thenational.ae/business/econ ... l-deposits

Patrick Werr’s facebook account lists all his articles. https://www.facebook.com/patrick.werr

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Re: VAT- free Goods & Services

Post by Bombay » Sun Jul 03, 2016 9:30 pm

newcastle wrote:Egypt's finance ministry has listed 52 commodities and services that will be exempted from a new value-added tax (VAT), which is expected to be applied this year after it is approved by parliament.
According to a ministry statement emailed to press on Friday, the exemption list will include all essential food goods and dairy products, in addition to babies’ milk and their nutritional supplements.

Foods that are sold to consumers through shops and restaurants without touristic licences will also be free of VAT, the statement said.

Look like your average poor Luxorian won't be hit too hard. I don't imagine they frequent restaurants with a touristic licence either.

http://www.amwalalghad.com/en/?tmpl=com ... t&id=46189
There are now only around 10 tourist licensed restaurants in Luxor the VAT replaces the sales tax already charged by us. However many non tourist licensed restaurants charge the same taxes without paying them.

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Re: VAT- free Goods & Services

Post by Hafiz » Mon Jul 04, 2016 4:08 pm

Bombay - are you saying that some businesses are already charging VAT? If so, someone is collecting for themselves because Reuters says that the law is not yet passed and, as of Monday, was yet to be referred to the Parliament: http://www.reuters.com/article/egypt-debt-idUSL8N19J5YQ

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Re: VAT- free Goods & Services

Post by Bombay » Mon Jul 04, 2016 11:13 pm

No they charge the 10% sales tax they do not pay some even charge the 12% service they don't need to.

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Re: VAT- free Goods & Services

Post by Dusak » Tue Jul 05, 2016 3:46 am

Most shopkeepers here will take the opportunity to make a bit on the side if they can get away with it. I use a mouthwash called TANTUM VERDE, a 125 ml bottle. The price, over the last four years has always been 2.5Le. They now charge 4.5le although the boxes still state it is 2.5le. When I questioned this they just state that the government has told them to increase the price on all stock. Load of ******** as far as I'm concerned, but what can you do if the product is the one you like above all others.
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