Algeria Increases Taxes For Grains&Oilseeds Jan. 22, 2017

Highlights

Algeria's 2017 Finance law increases value added tax for many products and will decrease imports of barley, corn, soybean meal, rice, oat, sorghum and DDGs. The increase became effective January 1, 2017.

Crop Update

The decline in rainfall and the increase in temperatures in October and November affected many sectors related to agriculture and particularly, cereal farmers who are in rainfall dependent regions. Only about 20 percent of normal rainfall fell in September and October 2016. The lack of precipitation coupled with above-average temperatures, depleted the soil moisture necessary for winter crop planting. Some areas in western and central Algeria suffered from short-term drought. Climatic conditions in Algeria have changed since the beginning of January 2017. Nearly every region has received rain and or snow which hopefully will relieve farmers' concerns and mitigate the negative impact of early season dry conditions.

Policy update

The FY2017 Finance Law increased VAT rates as part of the new fiscal measures for 2017. The current rate will increase from 7% to 9%, and the standard rate from 17% to 19%. The new rates became effective January 1, 2017. The 9% rate applies to about 80 products of which some are grain and feed products such as barley, oats, corn, rice, sorghum, mills by-products (malt, starch, gluten), pasta, couscous, as well as soybean meal, and DDGs. Also included are others residues, soybean flour defatted, and mineral vitamin and/or nitrogen concentrate. According to an Algerian Press Service news release, the Directorate-General of Taxes reports that this change in rates "has no direct impact" on the sales price of dozens of products such as bread, bread flour, milk, medicines, sugar, soy-based oil, fruit and vegetables excluding imported products. As for products not exempt from VAT, the impact on the price is 2%. The increase in VAT will likely have the effect of slowing the pace of imports of many products. Wheat is not on the list of products to be affected by the increase as it remains exempted from VAT.

The increase in VAT for affected products is part and parcel of Algeria's desire to reduce imports. Whether the government's new VAT regime will have the intended effect is unknown.