Being a sweet tooth could soon start costing you more at the shops, as the Finance Ministry is planning to introduce amendments to the Value Added Tax (VAT) Law that would scale back exemptions on sugar, a government source told EnterpriseAM. Also on the VAT exemption chopping block are training services, along with soap detergents.The move aligns with the draft FY 2025-26 budget, which targets one-off revenues equivalent to 0.6% of GDP by phasing out tax exemptions.

REMEMBER- The Finance Ministry has been looking to address tax distortions by phasing out VAT exemptions and revisiting goods and services taxed at non-standard rates, three government sources told EnterpriseAM last month.

The move is expected to help your waistline and the budget — with sugar now forecasted to raise some EGP 443 mn after sugar was previously untaxed.

Training services will also soon have to pay the standard 14% rate for the first time, but we’re yet to hear how much the state thinks this will bring in.

The goods are from 19 that the International Monetary Fund has recommended we cut exemptions for. However, don’t expect to see all exemptions rolled back at once, as efforts to scale back exemptions will be gradual so as to not accelerate inflationary pressures, we were told.

It’s about more than increasing tax revenues for the year, because the Fund argued that sugar shouldn’t be given its favorable status as a core food item, given its contribution to high diabetes rates in the country and resulting healthcare strain, a source told us.

Despite higher prices for consumers, the move will actually help the private sector, our source in the government argued. We were told that investors have demanded a more universal value added tax across the board because exemptions stop them deducting tax on production inputs. Closing manufacturers out of this tax deduction on production inputs has eaten away at margins and made imported manufactured goods more attractive, the source explained,

The Finance Ministry has also raised its target for cigarette tax revenues to EGP 111.7 bn, up from EGP 95 bn this year. A government source told us that cigarettes remain a flexible revenue stream, with rates adjustable via ministerial decree if needed.

The first tax-driven price hike for cigarettes — a 12.5% increase — is slated for November, with no earlier adjustment expected unless diesel or fuel prices climb, head of the Federation of Egyptian Industries’ tobacco division Ibrahim Imbaby told EnterpriseAM.

ICYMI- Taxes on goods and services will drive state revenues for the upcoming fiscal year, with collections projected at EGP 1.1 tn — the largest share of the government’s EGP 2.6 tn tax revenue target.

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