Back to the complete issue
Wednesday, 20 June 2018

Parliament wants to raise income tax for salaries exceeding EGP 500k per annum

LEGISLATION WATCH- Is the wealth tax coming back in a watered-down form? House Budget committee is looking to raise tax rate on salaries >EGP 500k p.a. to 25%: The House Planning and Budget Committee is looking into amending the income tax code bring back a wealth tax that would see salaries of more than EGP 500k per year taxed at a 25% rate against today’s 22.5%, Al Mal reports. MP Mervat Alexan, the architect of the suggestion, says it’s not a tax grab: She wants to cut taxes on lower income earners at the same time. Parliament had signed off on income tax cuts and raised the minimum threshold for exemptions earlier this month to EGP 8,000 a year. Egypt cut the top tax rate to 22.5% from 25% back in August 2015.

What Rep. Alexan apparently hasn’t figured out: Just about every single employee in Egypt is quoted a net salary, meaning a salary after businesses remit wage taxes, social insurance, et cetera. No salaried employee in Egypt remits a tax return of his or her own unless they have outside income, so the working poor would never feel the impact of her proposal.

Which brings us to the bigger issue here: As business owners, all of us need to stop quoting net salaries. Speaking only in terms of net, take-home salaries shields hides from your staff the true extent of their benefit package (and the real cost of labor to you, the business owner / manager): What you pay in taxes to employ them. How much your portion of their social insurance cost really is. Et cetera.

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2022 Enterprise Ventures LLC.

Enterprise is available without charge thanks to the generous support of HSBC Egypt (tax ID: 204-901-715), the leading corporate and retail lender in Egypt; EFG Hermes (tax ID: 200-178-385), the leading financial services corporation in frontier emerging markets; SODIC (tax ID: 212-168-002), a leading Egyptian real estate developer; SomaBay (tax ID: 204-903-300), our Red Sea holiday partner; Infinity (tax ID: 474-939-359), the ultimate way to power cities, industries, and homes directly from nature right here in Egypt; CIRA (tax ID: 200-069-608), the leading providers of K-12 and higher level education in Egypt; Orascom Construction (tax ID: 229-988-806), the leading construction and engineering company building infrastructure in Egypt and abroad; Moharram & Partners (tax ID: 616-112-459), the leading public policy and government affairs partner; Palm Hills Developments (tax ID: 432-737-014), a leading developer of commercial and residential properties; Mashreq (tax ID: 204-898-862), the MENA region’s leading homegrown personal and digital bank; Industrial Development Group (IDG) (tax ID:266-965-253), the leading builder of industrial parks in Egypt; Hassan Allam Properties (tax ID:  553-096-567), one of Egypt’s most prominent and leading builders; and Saleh, Barsoum & Abdel Aziz (tax ID: 220-002-827), the leading audit, tax and accounting firm in Egypt.