The Ministry of Finance will sign an agreement with the Organisation for Economic Cooperation and Development (OECD) to obtain technical assistance to fight tax evasion and help the Tax Authority develop its tax transparency policies.
This came during the meetings in Washington, DC between the Egyptian Minister of Finance Amr El-Garhy and officials from the Tax Policy Department in the OECD, IMF officials, and representatives of the US Treasury Department. Also in attendance were El-Garhy’s deputy for tax policies Amr El-Monayer and his deputy for financial policies Ahmed Kouchouk.
El-Monayer explained that the technical assistance will include methods to fight “harmful tax practices” such as transferring profits of companies abroad in zero-tax areas, which he said will later be reflected in the erosion of the tax base.
During the meeting, the Egyptian delegation agreed with IMF officials to cooperate in studying the methods to implement the Value Added Tax (VAT) law.
In the current fiscal year (FY) 2015/2016, budget revenues from taxes are expected to amount to EGP 422.4bn (14.9% of GDP), compared to EGP 364.2bn in FY 2014/2015, a growth rate of approximately 13%.
Revenues from sales taxes in the budget are also expected to increase from EGP 118.4bn in FY 2014/2015 to EGP 159.8bn (5.6% of GDP) this year.
Meanwhile, revenues from general taxes are expected to increase from EGP 207.4bn last fiscal year to EGP 213.5bn (7.5% of GDP) in the current fiscal year.
The procedures include completing the VAT law, which is currently partially applied, with the aim of ensuring social equitability and to resolve the issues in the current system.
The government has estimated it will collect EGP 35bn if it applies the VAT in FY 2016/2017.
Egypt has been seeking a loan from the IMF for five years, having introduced economic reforms to qualify for the $5.5bn loan.
The government views the IMF loan as a crucial remedy to its burdened economy, as it will provide a direct influx of liquidity and will stem the country’s growing budget deficit. Cairo also hopes the economic reforms it undertakes at the behest of the international lending agency will bolster investor confidence.