Back to the complete issue
Tuesday, 22 January 2019

FinMin wants to impose stamp tax on social media ads of up to 20%

EXCLUSIVE- FinMin could impose stamp tax of up to 20% on social media ads: The Finance Ministry appears set to impose a stamp tax on social media and internet search ads and has completed drafting legislation to that effect, a senior ministry source told Enterprise. Companies running ads on social media companies, including Facebook and Twitter, along with Google, would be obliged to pay a stamp tax of 20% of revenues from the ad, treating social media buys exactly the same as print ad purchases. Individuals placing an ad on these sites would pay a 15% stamp tax. Companies would also have to pay value-added tax, but there has been resistance from the tech crowd to collecting the 14% VAT. The new taxes would be imposed through amendments to the VAT Act, the Stamp Tax Act, and the E-commerce Act. These amendments will require the sign off of the House of Representatives.

What does this mean for the average Joe? Well, if you are a company, expect the price of your Google and social media ads to rise to 20%, and 15% if you are all by your lonesome. The source explained that the ministry fully expects the companies to pass the costs of the tax to the consumer.

Hurdles to implementation: Among the challenges of taxing social media ads is how to (a) track all the ads bought by Egyptian companies and (b) monitor their pricing. The government has previously tried to open talks with the “FAANG” gang about taxing adverts, but has been given the cold shoulder. Egypt is now signing tax information sharing agreement with other countries that could, in part, help it keep better tabs on the origin of ads and their prices, our source said. As we noted recently, Finance Minister Mohamed Maait attended an OECD meeting in Tokyo on information sharing.

Before you complain that this is a blunt tax grab (which it is), ask yourself why an ad buy with a multinational giant should not be subject to stamp tax, but a domestic ad would be. Scrap the stamp tax on all advertising or treat everyone equally, we say. In the meantime, countries the world over are angling to have web-based businesses pay their share of taxes — Egypt is no different.

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.