The House of Representatives has approved a baseline rate for the value-added tax. The VAT will ring in at 13% in year one and then rise to 14% in year two, Al Borsa reports. The House set the baseline rate in the same session as a show-of-hands vote approved the VAT in principle after a last pitch by Finance Minister Amr El Garhy. That sets-off a final round of debate on the measure that could end with a vote as soon as tomorrow — MPs have said they could vote on the VAT after as little as three sessions of debate. The government says the law will come into effect in October if the House approves it this week.

The state is expected to pull in about EGP 20 bn in FY 2016-17 at a 13% rate, said Deputy Finance Minister Mohamed Moeit. The 1 ppt cut from the 14% baseline rate the ministry had proposed will slash at least EGP 8 bn off the EP 32 bn in annual receipts the ministry was hoping to net, while state coffers will lose an additional EGP 4 bn in revenues because the measure will be in effect for only 10 months of the current fiscal year. The House Planning and Budget Committee is predicting the VAT will see the state collect an additional EGP 24 bn, but its math doesn’t factor-in the two-month delay in approving the measure.

The House deliberated on 39 articles and voted to approve the first 10 of them during yesterday’s debate, Al Borsa reports. The approved articles govern the transition from the sales tax to the VAT regime and allow businesses a three-month grace period to comply with the law. Discussions over the next few days will be expected to include the law’s exemptions list, according to the newspaper. As we noted yesterday, the Finance Ministry added international school tuition and pharma products to the list of exemptions, but will not announce the full list until after the legislation is voted on.

Detractors in the House: The VAT passed in principle thanks to the backing of the dominant Support of Egypt coalition, which also called on the Ismail government to update the House regularly on how revenue from the VAT is being used and its effect on inflation, Al Shorouk reports. Al Wafd, which had announced on Saturday that it was against the law, changed its mind and voted in favour, AMAY reports. A number of MPs from the 25-30 coalition walked out from the session in protest after the House voted to approve the VAT in principle, Al Masry Al Youm reports, prompting House Speaker Ali Abdel Aal to refer them to the House Disciplinary Committee. The Salafi Al Nour party also said it opposed the law on the grounds it would be inflationary.

Separate taxation legislation for SMEs unlikely to pass the House? It is unlikely that the House will approve a separate tax system for small businesses that fail to meet a minimum income threshold, said MP Ashraf Al Araby, a member of the House Economics Committee, Al Mal reports. The MP says the constitution affords the government the right to develop a separate tax system for SMEs without enacting new legislation.