The VAT-exempt items have been reduced following a directive signed by Finance Minister Ahmed Shide last week. The revised list now includes cereals, agricultural inputs, and capital goods. Notably, animal feed, edible oil, travel agent services, prints for publication, import of fuel gas, and pension funds are now included in the taxable base.
The forthcoming tax proclamation, currently under parliamentary review, aims to broaden the VAT tax base to encompass various services by the next fiscal year. In 2022, VAT constituted approximately 21pc of annual tax revenues, amounting to nearly 336 billion Br. Of this, 58pc was derived from domestic taxes, with the remainder sourced from customs revenue.
With a target of achieving an 18.2pc tax-to-GDP ratio within four years, this pending legislation represents a pivotal tool for revenue mobilisation in the developing world, where tax-to-GDP ratios typically hover around seven percent.
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