The Egyptian Ministry of Finance has raised the customs dollar exchange rate [used to calculate customs duties on imports] for non-essential and luxury goods, tying it to the Central Bank of Egypt’s dollar exchange rate for a month. The rate had been fixed at LE16 to the US dollar for the past 13 months.
The decision “helps increase revenues from value-added taxes on non-essential and luxury commodities,” a Ministry statement said. Increasing the customs dollar exchange rate will raise revenues from the value-added tax (VAT) by LE2.5 billion and will lead to an increase of LE6 billion in customs revenues.
“Our goal is not only to collect more taxes, but also to encourage local industries by providing them with fair competition with imports,” said Minister of Finance Mohamed Maait. “Exempting the staples necessary for the largest number of people reflects the government’s keenness to strengthen social protection and protect social groups most affected by the economic reform programme.”
English.ahram.org.eg reported on a study by local investment bank Beltone Financial claiming that floating the customs dollar exchange rate would increase revenues from taxes even in the absence of new ones. However, increases in tax revenues from higher customs fees would not be large, it said, since these represent only six per cent of tax revenues targeted at LE770 billion in the 2018-19 fiscal year.
The ministry’s decision obliges a number of items to be traded according to the CBE’s dollar rate, exempting them from customs taxes. In the fruit section, the list includes bananas, melons, papayas, apricots, cherries, guavas, mangoes, coconuts, pineapples and grapes.