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Thursday, 30 January 2020

Legislative amendments to widen VAT tax base eightfold -Maait

EXCLUSIVE- VAT Act amendments to widen tax base eightfold- Maait: In-the-works amendments to the VAT Act will aim to increase the number of taxpayers to 550k from 70k currently through “tighter governance practices”, Finance Minister Mohamed Maait told Enterprise. This may be done by linking the tax and customs authorities’ databases to better track cases of tax avoidance and close loopholes, he said.

Why? As it stands, businesses with a turnover of less than EGP 500k a year are exempt from VAT. Some businesses deliberately find ways to understate or misrepresent their turnover to benefit from this, leading to a huge discrepancy between the number of registered income tax payers (c. 3 mn) and registered VAT taxpayers (c. 216k). The government then only ends up collecting VAT from 70k taxpayers since many submit nil tax returns, Maait said.

The amendments will be ready in 2-4 weeks, Maait said last week. Aside from VAT-exemption for local paper companies, and the plan to widen the tax base, the ministry has been scant on details about the amendments. The minister reassured taxpayers when he first announced the plans last year that there would be no changes to the headline rate.

Changes to the universal healthcare tithe incoming: Changes to the funding system for the new universal healthcare system should be made clear soon, but the ministry is yet to decide whether it will put a cap on the currently imposed tithe to support the system or base the tax on profits, Maait tells us.

The healthcare system is currently funded by an uncapped 0.25% tithe imposed on the revenues of all companies. The ministry responded to industry pressure and has been working on amending the system. Two government sources told us in September that if the ministry chooses to keep the tithe on revenues, as opposed to making it on profits, it would be capped at EGP 10k per company.

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