Keen to establish a community dialogue for discussing legislative amendments and administrative reforms

A draft law of value added tax grants unprecedented benefits for production society

Full deduction of taxes on goods and services production inputs... In exporting, taxes shall be reimbursed within 6 weeks

Decreasing capital tax rate from 10% to only 5%, and reimbursement of the same with the first Tax Return

Tax delay shall be estimated on the basis of Central Bank discount and lending rate, adding 2% instead of the additional tax, i.e. reducing it to almost half

A reform plan for the Department’s administrative structure, incentives to be paid to encourage the transfer to tax offices that have staff shortage.

Integration operations will be concluded after making a dialogue with the Authority staff.. Employees shall not be harmed; however, their functions will be expanded.

Grievance and appeal procedures on income and sales tax estimations shall be standardized.

Minister of Finance, Mr. Hany Kadry Dimian, hold an expanded meeting with 250 of district managers and heads of Egyptian sales taxes offices, representing Department’s middle management and they are directly responsible for tax enforcement; in order to discuss the Ministry’s plans for transformation to Value-Added Tax (VAT) system, instead of sales tax, as the most equitable and investors promoting tax system.

In the beginning of the meeting, the Minister confirmed his keenness on establishment of sustainable community dialogue with tax community and tax administration so as; to discuss all the legislative amendments, development of the administrative systems concerned with laws and regulations enforcement, exploring the related different points of views; to use it in the final draft of those legislative and administrative amendments. So as to contribute in achieving reform efforts of the State’s objectives, either by expanding tax base or tax resources development.

He said that the benefit of this meeting is to identify through the middle management staff, as the most experienced and associated with tax community, the vulnerabilities in the current law to be treated and avoided in the new law, as well as investigate reduplication of the recent tax proceeds for three or four times, especially the Egyptian economy is capable to generate tax revenues much more than they actually achieved. 

The most significant components of Value – Added Tax law as presented by the Minister, including the permission of deducting the full former paid taxes on production inputs, either in industry or services sector; in addition to decreasing capital goods taxes from the current ratio of 10% to only 5%; and it will be fully reimbursed on submission of first tax return. This will enhance the investor’s available liquidity levels, whereas reimbursement of tax on capital goods currently takes many years.   

The Minister also added that tax reimbursement period will be decreased from 3 months to 6 weeks only, in case of exporting, and reconsidering producers’ credit balance, in order to be promptly reimbursed, if accumulated for successive 6 months. 

He clarified that an important benefit of the proposed system is to substitute payment for tax delay against delay in additional tax, whereas tax delay shall be estimated on the basis of Central Bank discount and lending rate, adding 2% instead of an additional tax of .5% for each week, which practically means reducing the amount against delay to almost half. 

Noting that another benefit thereof is to unify grievance and appeal procedures in both income and value added tax laws, with simplification of those procedures, and unification of sanctions of tax evasion crimes and contraventions; for purposes of actual integration for both income and value added tax , for the convenience of tax payers.

The Minister asserted that these new benefits and facilitations must reach to taxpayers to ensure success of value added tax transformation; this is the task of tax community foremost, also the middle management, and tax officers who directly deal with tax community, whereas we rely on their efforts in delivering the new policy to reform tax system.

About concerns regarding reducing powers or losing one’s job, which raised by some persons, related to integration for both Income and Sales Tax Departments. The Minister confirmed that such concernsare totally incorrect; because Ministry of Finance is needs all human forces (man powers) in tax offices and districts; in order to fulfil the increased tasks of tax administration under tax reform processes.

The Minister said that it is expected to expand and amend tax officers’ tasks to cope with public interest and new scope of tax. The Minister intensified on his severe keenness that no person shall be harmed due to integration process or be exposed to injustice, unfairness, or impairs his rights; so he is keen to complete integration through continuous consultation and coordination with tax officers. He pointed that, in contrary to those concerns; integration will contribute in mitigation of burdens on tax administration.  In the same time, it will be charged of new tasks; perhaps the most important is to expand tax community, increase numbers of tax payers, and reducing tax evasion.

The Minister revealed that he issued instructions for tax officer leaderships to treat the phenomena of staff accumulation in some tax offices, while others have shortage in staff. He pointed that the Ministry also studies the development of the administrative structure of Taxes Authority; put a new organizational regulation governs the processes of distributing manpower on tax offices and districts; as well as to put a plan for work development in tax offices in all over country; in order to ensure occupation of best key staff and cadres, instead of being accumulated in tax districts, as tax offices are charged of the largest and direct work with tax payers.   

He said that, within the Ministry’s  of interest in human resources and development their skills, first deputy to the Minister for institutional development, Dr. Amer Badawy, will be delegated to supervise on development of the administrative structure and the Authority’s work policies raising the efficiency of the Ministry and its affiliated authorities’ human resources, as well as activate the plan of electronic connection between revenue authorities either taxes or customs, within the adjustment plan of tax community. 

The Minister disclosed that a meeting will be hold with both Egyptian taxes and Customs Departments in the next week, to discuss electronic linkage plans for both departments’ data base, make all data and information on economic activity available, for both departments’ Central Investigation Administrations in specific, in addition to Combating Evasion Administrations to reduce tax evasion.

The Minister confirmed that taxes are a national responsibility which has a vital role, so as no financial bottlenecks shall be faced by government, especially under constitutional entitlement application for increasing spending on education, health, and scientific research. This will require increase of public revenues in line with the expected increase in public expenditures.

The Minister delivered a message to tax officers through meeting’s participants, confirms that tax officers represent sovereignty of the State; in order to fulfil their duties fully. He pointed that the State expects a lot from tax officers under the current hard economic circumstances, where there is a need for great financial flows to upgrade public services, especially in both education and health sectors to match the society’saspirations.

He also said that he feels best performance of tax returns, but a lot of effort shall be required to recover the potentials of the Egyptian economy to overpass the crisis.

The Minister referred that, about registration limit in Sales Taxes, there is a social dimension for the file of registration level limit; so as no small and micro institutions shall bear any additional burdens, on the contrary, in the new law facilities and benefits shall be granted to them, as we targeted, to be encouraged to voluntary enter the official sector.

The head of Egyptian taxes Authority, Mustafa Abdul Qadir, said that value added tax  law draft contributes in solving the ratio of 95% from sales tax law enforcement problems, as it also considered a quantum leap in consumption taxes. He pointed that the law is not a new one, noting that tax is partially enforced in industrial field actually.

He also added that value added transformation will achieve many positive economic effects, the most important of which  is expansion of tax base to include goods and services; and putting a list of exempted goods, considering low income and most vulnerable, to ensure achieving tax equity, based on flat rates rather than various rates for taxes. 

He also disclosed about the formation of small workshops headed by Head of researches sector in the Authority, Hassan Abdelallah, include Authority’s young cadres and leaders, to make an institutional and intensified dialogue about the draft law of sales taxes, and with the Authority’s executive officials, to know their remarks on this law.