Is the capital gains tax on EGX trades back in play? We suspect so, given a recent media report on a proposal by a finance industry association that comes across as a bid to shape the debate over the reintroduction of the measure.

So, what’s the issue? The government said in 2017 it was shelving for three years a proposed capital gains tax on stock market investments after a revolt by investors. Instead, the Finance Ministry imposed a 0.125% stamp tax that would rise to 0.15% and then 0.175%. The IMF, as part of the conditions for the USD 12 bn extended fund facility, recommended the government fully introduce the capital gains tax, but reports back in May citing unnamed government sources suggested the tax would not be brought into effect “anytime soon”; the stamp tax on EGX trades, meanwhile, remains at 0.15% this year.

What’s happening now? The Finance Ministry is apparently studying EGX data to gauge how a capital gains tax (CGT) might impact activity, the domestic press reported last week.

What to expect: Sources with whom we spoke over the weekend said the Madbouly government is keen to avoid spooking non-resident investors with a new tax and so would restrict CGT to resident investors (Egyptians or foreigners living in Egypt).

If this sounds familiar, it’s because it is: Finance Ministry officials told us earlier this year that one proposal in the works was to bring in a 10% CGT for resident investors, who would be exempt from stamp tax on trades. Non-resident investors would pay the stamp tax of 0.1% to 0.15% on trades, but be exempt from the CGT. We had reported again in September that the changes would be enacted as part of a basket of tax incentives designed to encourage new listings on Egypt’s bourse.

Enter ECMA, the finance industry lobby association: In a proposal that was in a number of reports mischaracterized last week, the Egyptian Capital Markets Association floated the idea of imposing a 0.1% withholding tax on transactions involving resident investors. Proceeds would then be deposited in a capital gains tax account at the Tax Authority, which would then refund the amount to any resident investor that makes a loss on an investment in any one publicly traded company in a given tax year. Misr for Central Clearing, Depository & Registry would then walk back through transactions each year and refund investors found to have paid more than 10% of their realized profits for the year.

The final word of warning: We expect the issue to be in the press a fair bit in the coming period given how messy the “investor revolt” was the last time the CGT was mooted. In any event, we have a while to go yet: The measure, if it is to see the light of day, needs to go from the Finance Ministry to cabinet in its final form before being referred to the House of Representatives for debate and, eventually, back to FinMin for the drafting of executive regulations if the bill is enacted by Ittihadiya.