Algeria: 2017 Finance Law Provides For Steep Tax Hikes

The Government started on Wednesday examining the ins and outs of the draft finance law for 2017 by notably planning to slash spending by 14 percent in 2017, after a 9 percent cut this year, seeking to adjust to lower energy revenues.

The government foresees within the next Finance law 2017 to increase the rate of VAT (value added tax) from 17 to 19%, according to sources close to the Ministry of Finance. This proposal will be submitted for free-wheeling debate to the various commissions of the two houses of parliament before the planned vote on the Finance Law. 

This 2% hike will allow the state to garner substantial financial resources in order to “balance” the accounts of the ¨Public Treasury, beset by a large deficit in recent months because of the financial crisis facing our country due to dwindling oil prices on the world market. 

However, for these measures to be endorsed, the government needs all the votes from the parliamentary majority, especially those of the FLN and the RND parties.

It is also envisaging hiking subsidized gasoline and diesel prices for a second straight year to rein in rising domestic consumption and curtail the country’s import bill.

Oil and gas sales account for 60 percent of Algeria’s state budget and make up 95 percent of export revenues. Attempts to diversify the national economy are now underway as part of a government’s newly-adopted economic strategy.

This year it delayed non-essential infrastructure projects and started raising gasoline, diesel and electricity prices for the first time in more than a decade.

To lessen next year’s deficit, new taxes are expected to be imposed by the government on local and imported goods.

The government expects energy revenues to reach $35 billion in 2017, up from a projected $26.4 billion for this year but slightly down from $35.72 billion in 2015, and well under the $68 billion earned in 2014.

The proposed fuel price hikes are included in the draft budget for 2017, which still needs government and parliamentary approval.

Prices for unleaded gasoline, premium gasoline and regular gasoline are poised to go up by 13.08 percent, 12.94 percent and14.11 percent per liter respectively and the diesel price by 7.85 percent.

Domestic prices for energy products are still very low by international standards. Diesel currently costs 18.23 dinars a liter (16 U.S. cents).

The draft will enable Algerian firms to seek external financing if they fail to raise enough money domestically.

It includes new and higher taxes. Taxes on domestic property rentals would increase by between 7 and 10 percent and tobacco prices would rise between 60 and 100 percent.

Prices for household appliances such as air conditioners, computers, refrigirators and washing machines would rise by between 5 percent and 60 percent under an energy efficiency tax, and advertising contracts for foreign products would be taxed 10 percent.

In a bid to soothe a restive national public opinion, Prime Minister Abdelmalek Sellal underlined earlier this week that the government would maintain state subsidies for pivotal sectors such as education, health and housing.

“The purchasing power of citizens won’t be harmed as a result of this package of new measures contained in the 2017 draft Finance Law,” he underscored.