Egypt's House of Representatives gave its initial approval for a bill to introduce Value-Added Tax (VAT) during preliminary discussions in parliament on Sunday, with a number of sources claiming the a rate of 13 percent was agreed on.
The law, which if introduced would replace the current 10 percent sales tax, is one of several reforms hoped to turn around the country's struggling economy.
The bill was submitted by the government last year with a proposed tax rate of 14 percent; the rate Finance Minister Amr al-Garhy argues is necessary if Egypt is to rein in its gaping budget deficit.
While figures like Mohamed al-Bahi, head of the tax committee at the Federation of Egyptian Industries, have argued to bring down the proposed VAT rate, Garhy has been pushing for higher rates and firmer policies.
"One-hundred and fifty countries apply VAT laws, including…Morocco, Congo and Kenya. But unlike the Egyptian bill, these countries do not give special tax exemptions on food, and health, education and transportation," said Garhy.
He described the bill as one of the new social protection measures to be adopted by the state: "Taking from those can afford to pay and giving to those on low incomes".
Hussein Eissa, the chairman of the House of Representatives' Budget and Planning Committee, said that introducing the VAT bill has been delayed, along with a collection of other tax reform measures, since the 1990s.
It is estimated that the law will garner LE35 billion to finance the needs of the poor under the state's social protection program, Eissa said.
Head of the Support Egypt Coalition, Saad al-Gammal, and the head of the Wafd parliamentary bloc, Bahaa Eddin Abu Shaqqa, are in favor of the bill in principle, as part of what Shaqqa described as a "fierce war" against the deficit.
Alaa Abed, head of the Free Egyptians Party bloc has also confirmed his support for the draft law after studying the pros and cons.
The Salafi-led Nour Party, on the other hand, rejected the bill. Leader of the parliamentary bloc Ahmed Khalil expressed doubts that the government will be able to enforce the law, identifying more negative than positive results from VAT.
MP Haitham al-Hariri described the policy as "pro-rich", calling on the government to apply a progressive tax in place of VAT.
The approval of the bill on Sunday was set against the backdrop of a Chamber of Commerce report on last week's sharp rise in commodity prices.
The report, presented in parliament by the Federation of the Chambers of Commerce before the discussion of the VAT bill, said commodity prices rose 2.25 percent on average over the course of last week.
According to the report, the price of tomatoes increased by 50 percent, lentils by 12 percent, onions by 7 percent, poultry by 4 percent, Tuna by 6 percent, and soap by 25 percent.
Edited translation from Al-Masry Al-Youm
