A confidential study is being conducted on ways to increase development charges and sales taxes on imported or locally assembled cars, a source revealed to Daily News Egypt.
Government income from sales taxes has begun to decrease after the application of Phase V of the Economic Partnership (GATT) Agreement which states that customs would decline by 10% annually. This led to lower customs in the state treasury.
Several committees are now working to finalise the legislations of new tax revisions and it is expected that the decision will be enforced in the next few months.
Once applied, the decision is expected to cause mass unrest within the market, especially since car prices are significantly increasing due to the daily changes in the foreign currencies’ exchange rate against the Egyptian pound. The tax increase will put a burden on the consumer regarding the final price, as well as the assemblage industry as a whole. Local assemblers will not gain any comparative advantage.
The current sales tax on cars with a 0 to 1.6 litre engine is 15%, while cars with a 1.6 litres to 2 litre engine have 30% tax rate. Tax on cars with more than 2 litre engines, however, amounts to 45%, and the tax on local cars of the same capacity can reach 30%, which is the only benefit a local producer has.
Development charges on local and imported cars with an engine that is less than 1.6 litres are now at 3%, from 1.6 litres to 2 litres charges are at 5%. Charges on cars with an engine of 2 litres is at 8.5%.
The committee is working on changing these numbers to more than 15% for both development charges and tax on sales, in order to increase the country’s income from car sales.