Committees Briefing 2000
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Customs & Taxation Committee

• Sales tax on capital equipment - November 2000
• GATT – What’s in it for Egypt? - October 2000
• DEPRA team’s executive summary - April 2000
• The Customs Authority’s new approach - February 2000

Sales tax on capital equipment

Mr. Hassan Hegazy, chairman of the Customs & Taxation Committee, introduced guest speaker Mr. Mahmoud Ali, head of the Sales Tax Authority, at the Semiramis Inter-Continental on November 29 to discuss the topic of "Sales tax on capital equipment."

Mr. Ali highlighted Egyptian sales-tax history, how it was introduced in 1991 and the reasons behind its delay. He also discussed the resources sales tax and how it decreased the balance-of-payment deficit. Mr. Ali also explained tax objectives, the entities that should pay and how the authority processes tax.

The second part of the discussion focused on the capital equipment sales tax along with why and how to pay in installments. Many members wondered about the possibility of eliminating it, but Mr. Ali responded that this could damage local production because it opens the door for more imports.

Other discussions were led on the difference between the manufacturing and services sector in processing sales tax on capital equipment and the exemption recommendations which come from the minister of finance.

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GATT – What’s in it for Egypt?

The General Agreement on Tariffs & Trade and "What’s in it for Egypt?" was the topic of discussion for AmCham Egypt’s Customs & Taxation Committee on October 25. Mr. Hassan Hegazy and Mr. Taha Khaled chaired the meeting, held on the AmCham premises. The guest speaker, Dr. Mohamed Maamoun Abdel Fattah, adviser to the minister of economy & foreign trade, gave a brief history of the agreement and discussed its ramifications for Egypt.

After the speaker’s presentation, there was a chance for the audience to ask Dr. Abdel Fattah about pertinent issues such as how Egypt has – or has not – benefited from membership in the World Trade Organization (WTO). Audience members asked specific questions pertaining to government policies regarding industrial goods and on specialized sectors, as designated by the WTO. The audience also questioned Dr. Abdel Fattah about the future of the GATT and its influence on small businesses.

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 DEPRA team’s executive summary

The AmCham Customs & Taxation Committee welcomed members of the DEPRA advisers who are offering technical advice to help the Customs Administration of Egypt to modify its valuation procedure. The minister of finance has requested this technical assistance from the team to improve Egyptian customs operations and also to become compliant with Egypt’s WTO membership commitment.

The objective of the meeting was to discuss the draft paper prepared by the team and addressed to the minister of finance.

Members of the DEPRA project team in attendance were Mr. Maurice Thorne, senior economist and deregulation adviser, Mr. John R. Holl, customs official, Dale O. Torrence, attorney at law and expert in customs procedures and free-trade zones. This follow-up meeting took place on April 12, 2000 and was chaired by Mr. Hassan Hegazy.

The WTO allowed Egypt to delay application of the agreement for five years, making the deadline June 30, 2000. Egypt has asked for a time extension of three years from the June deadline. The DEPRA team discussed their expectations on the time extension and the country’s position if compliance was not made by the set date. A realistic recommendation in terms of months was made by the team and shared with the audience.

The attendees asked questions regarding classification issues and disputes between importers and the Customs Authority. Other concerns include the devaluation of invoices by importers, fluctuating invoice values, and availability of information on the changing rules and regulations issued by the Customs Authority. The devaluation of invoices is a matter of honesty and integrity and therefore difficult to monitor. Risk management was suggested as a resolution. Circulars sent out to importers who could pay fees and become members of an "importers association" were suggested as a solution to the information-sharing problem. New methods should be developed to educate the general public on the ways and means of the customs laws.

The average price system and its negative effect on low-quality product importers were raised for discussion. The penalty system should be reevaluated to match crime with injustice done.

DEPRA team members expressed their gratitude to the AmCham Egypt Customs & Taxation Committee for their honest and fair evaluation of the report. The team also discussed the planned upcoming meeting with minister of finance where a final version of the 30-page report will be submitted.

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The Customs Authority’s new approach

The committee held its first meeting for the 1999/2000 term on January 16. Guest speaker Mohamed Sheashaa, head of the Customs Authority, led a discussion entitled: "The Customs Authority’s new approach."

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