Is cabinet nearing a VAT compromise with the House? The Finance Ministry is planning to stick to its baseline rate of 14% for the value-added tax, a Finance Ministry source tells Al Shorouk, signalling at the same time that the ministry thinks it “understandable” the House wants to exempt some products from VAT. The statement hints that a possible compromise is in the works, which may see an expanded exemptions list, but a 14% rate maintained. The source does acknowledge the possibility that the House may pass the VAT with a 13% baseline rate.

An agreement will be reached next week, with the House expected to vote on the VAT legislation on 28 August, two days before the President is expected to put parliament in summer recess, said the source.

Accepting a VAT rate lower than 14% would significantly change FY2016-17 budget calculations, said Deputy Finance Minister Amr El Monayer, who declined to discuss where the ministry might look for revenue in the event the tax is watered down. The average VAT rate worldwide ranges from 15-20%, he added.