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Thursday, 9 May 2019

Egypt’s gov’t doesn’t intend to reintroduce the capital gains tax

The capital gains tax on stock market transactions isn’t coming back (yet). The government doesn't intend to reintroduce the capital gains tax on gains made on the stock market anytime soon despite deciding earlier this week to keep the stamp tax on EGX trades unchanged at 0.150%, government sources told the press. The decision to call off the scheduled stamp tax increase (which should have brought the levy to 0.175%) was prompted by requests from the Egyptian Capital Markets Association. Also a factor, the domestic press claims: revenues from the tax have fallen short of initial targets. The Finance Ministry had expected to net EGP 1 bn from the stamp tax, but collected only EGP 3 mn, according to figures cited by the newspaper. The ministry is studying alternatives to the levy, including either introducing a new tax similar to the stamp tax, or bringing back the capital gains tax somewhere down the line.

Background: The capital gains tax was temporarily shelved in 2017 and replaced by a provisional stamp tax until a planned reintroduction in three years. The reintroduction is a recommendation of the IMF.

Unpopular truth: It is unjust that day traders and portfolio investors should be exempt from capital gains taxes, but that folks who build real businesses are subject to capital gains taxes and taxes on dividends. Just sayin’.

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