Sep 28, 11:42 AM EDT

Egypt's president plans shift toward value-added tax regime as part of reforms

AP Photo
AP Photo/Julie Jacobson

Latest News
4,300-year-old pyramid discovered in Egypt
Women join fight against female circumcision
Cheap electronics threaten Egyptian repairmen
Egypt's Cairo university has banned teachers from wearing full face veil, sparking complaints

Smugglers kill Egyptian policeman near border with Israel, Egypt's Interior Ministry says

Egypt's Interior Ministry says smugglers have killed police officer near border with Israel

Egypt's president plans shift toward value-added tax regime as part of reforms

Egypt says death toll from hajj disaster has risen to 55, 120 missing

Buy AP Photo Reprints
A district summary of the Beige Book
Measuring economic stress by county nationwide
Mall malaise: shoppers browse, but don't buy
Unemployment by the numbers
Family struggles with father's unemployment
Saying an affordable goodbye
Hard times hit small car dealer
Latest Economic News
Job growth in retail and professional services accelerated in September, bucking overall trend

Unemployment rates improve for high school grads and inch up for recent vets

Cautious businesses pull back on hiring as depressed global growth finally catches up with US

How to dissect the jobs report: Apart from low unemployment, just how healthy is labor market?

US manufacturing barely expands in September as global growth weakens, oil drillers cut back

Bank of Japan tankan survey finds big manufacturers' corporate sentiment worsens at plus 12

France to cut taxes for 11 billion euros ($12.3 billion) to drive economy forward

Spain's central bank says economy grew by a strong 0.8 percent in third quarter

Eurozone consumer prices down 0.1 percent in September, first annual decline since March

World Bank: Palestinian economy worsens for third consecutive year

Greece's Debt Threatens to Spread
State budget
gaps map
Auto industry problems trickle down, punish Tennessee county
Women give old Derby hats a makeover in tough economy
S.C. town deals with highest unemployment in South
How mortgages were bundled and sold as securities
Tracking the $700 billion financial bailout
Tracking the year's job losses
State-by-state foreclosures since 2007
Credit crisis explained
Presidents and their economic legacies
Lexicon of the financial crisis
Americans' addiction to debt

CAIRO (AP) -- The Egyptian president plans to have his government introduce a value-added tax regime as part of major economic reforms, according to remarks published Monday.

The move, according to analysts, could help Egypt boost revenues and serve to bring the Mideast country's vast informal economy into the mainstream, though it will likely be difficult to execute. Egypt's government has been discussing implementing a VAT for years.

In an opinion piece published in The Wall Street Journal, President Abdel-Fattah el-Sissi said the VAT regime, along with a simplified tax system for small and medium-sized enterprises, will "raise revenues and bolster investment incentives by boosting growth, creating jobs and improving firms' cash flow."

Egypt's economy has struggled to come back from the tumult that followed the overthrow of longtime autocrat Hosni Mubark in a 2011 uprising. El-Sissi, now one year in office, has staked his legitimacy on stabilizing the country and reviving the economy.

Egypt has launched mega-projects, including a much-hyped extension of the Suez Canal. However, an announced proposal to build a new capital city has shown little progress in finalizing plans or securing investment.

In the newspaper piece, el-Sissi said his government is aiming for a 5 percent growth during the current fiscal year, "driven by rising foreign direct investment, and the implementation of various new energy, infrastructure and agricultural reclamation projects."

El-Sissi has also taken tough measures, including slashing fuel subsidies and amending the property tax law. He said his government has been "willing to forge ahead with the long-overdue and contentious reforms that prior governments had known were necessary but did not carry out."

Angus Blair of investment advisory firm Signet said detractors of the VAT are concerned it will affect lower-income people the most. However, "we don't know how broad the VAT will be, in terms of which sectors," which will determine its impact on the poor, he added.

Other experts agree that introducing a VAT regime will be challenging but they see a benefit in bringing the country's vast gray economy into the open.

"It also integrates the informal sector into the bigger picture, and is a step toward formalizing this informal sector and bringing it from the grey economy to the mainstream economy," said Wael Ziada, head of research at EFG Hermes. He added that implementing a VAT regime will be challenging given Egypt's relatively poor infrastructure in technology and record-keeping.

Following a visit to Egypt earlier this month, the International Monetary Fund said unemployment remains high, the fiscal deficit is large and domestic public debt is high.

At the time, IMF said the implementation of the VAT regime, combined with lower fuel and electricity subsidies "would go a long way toward improving the strength of the budget."

© 2015 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. Learn more about our Privacy Policy and Terms of Use.