Is the long honeymoon between the Sales Tax Authority and traders over? Sherine Nasr listens to controversial views on both sides The Sales Tax Authority (STA) has announced that the grace period allowed traders for registering with the authority has expired. Effective 29 September, all traders who failed to register are to be held legally accountable. "Now that the grace period has come to an end, it has to be clear to every trader and industrialist that the law gives us the right to take legal action against violators," said Mahmoud Mohamed Ali, head of the STA, at a meeting with representatives of the Egyptian Federation of the Chambers of Commerce (EFCC). The second and third stages of the sales tax were applied in July 2001. But in order to build channels of confidence between the STA and tax payers, the authority agreed to extend a one year grace period for all trade-related activities, during which traders were expected to register their activities with the authority. While a few traders were ready to comply with the law, the majority have still not registered, which has caused confusion in the market. "Traders who haven't registered were able to sell their products at a lower price because the products were not taxed," said EFCC chairman Khaled Abu Ismail. "It's a shame that the honest traders who registered were done an injustice. They feel that they have been betrayed." Abu Ismail said everybody should be treated equally before the law and traders who did not register on time will be paying all their taxes retroactively. However, the present market slowdown and technical loopholes in the sales tax law itself has made it difficult for tax payers to be treated equally. For example, one of the main pitfalls of the second and third stages of the sales tax law is that they apply only to traders with sales volumes exceeding LE150,000 annually. "This stipulation should be cancelled because it helps traders evade taxes without getting punished," said Ezzeddin Abdel-Hafiz, representative of Al-Fayoum governorate's Chamber of Commerce. Because some traders believe the STA will never be able to pin down their real sales volumes, they do not register. Abdel-Hafiz said it was necessary that the accounting offices in charge of traders' files produce accurate figures. The sales tax, which is 10 per cent of the value of a product, is collected from consumers and paid to the STA by retailers. The latter are required to issue a bill for every item they sell. The process is not as straightforward as it sounds, though. For one, most retailers do not keep records of their sales. "There are also a good number of retailers who deal in smuggled goods and who certainly cannot issue bills," Abdel-Hafiz said. While transparency is required on the part of traders, flexibility is also needed in the authority's dealings with tax payers. Hassan Soliman, a trader and a member of the Cairo Chamber of Commerce, said the STA has to take into account the fact that traders can only get hard currency through the black market. "Let's face it, banks do not provide dollars for any commercial activity. We have to buy the hard currency at a much higher price than the official rate. Yet, the STA uses the official dollar price when it estimates taxes. How can traders make up for the 12 per cent difference?" he asked. A more difficult task still ahead of the STA is how to compile a complete and accurate database of all traders -- a mission which trade unions themselves have, so far, failed to achieve. "According to our estimates, there are at least 1.5 million traders engaged in commercial activities who do not have a trade record, are not tax payers and are not registered in any of the trade or business unions," Abu Ismail said.
