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Monday, 28 November 2016

House considers proposals for amendments to tax legislations

Are the Ismail gov’t and the House about to tag-team the wealthy? The House of Representatives’ Budget Committee is looking into proposals to amend the income tax act to move Egypt towards a more ‘progressive’ taxation system, Al Borsa reports. State officials had previously mentioned that the government is considering shifting to a tax regime that would see individuals and companies at the higher end of the income scale paying a larger percentage of their income in taxes. Last year, the government had cut the income tax rate to a fixed 22.5% from 30% for individuals and corporations. Officials also scrapped a 5% wealth surtax for individuals and corporations that earn more than EGP 1 mn a year. Members of the House Budget committee told Al Borsa yesterday that while there is some opposition to raising taxes, the dominant Support Egypt coalition seems to be leaning in favour of the move. No story on this subject overnight gave any detail as to what representatives might be thinking.

The news out of the House comes as the Finance Ministry has moved from simply considering a more progressive tax system to openly advocating for one in its Human Development Report 2016, which came out a few days ago. The report basically states that the private sector has not been paying its fair share, according to Al Mal. In 2014, the private sector contributed 70% to GDP, but only 19% of its profits were taxed. Sales taxes on goods and services cannot compensate, as they only amount to 40% of all tax revenue — the majority of which is made up of income tax. Implementing a more progressive system would make the tax burden fairer, the report concludes.

(Take any assertion about what the report does or does not say with a teaspoon or two of salt: The ministry appears to have removed the report from its website.)

The report also reportedly takes a negative view of tax breaks, specifically the decision to delay the capital gains tax in 2015. The move is a break with principles of social justice in the Ismail government’s economic reform agenda, said the report, according to the Al Mal. The report also recommends imposing new taxes on real estate and mining.

But it’s not all bad: The Customs Authority has begun studying a fixed exchange rate for customs — a move called for by numerous importers, especially from the auto industry, according to Customs Authority head Magdy Abdel Aziz. Abdel Aziz added that the authority is looking to eliminate taxes in free zones and special economic zones, Al Mal reports.

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