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Sunday, 12 May 2019

Egypt is studying sweeping changes to tax legislation

EXCLUSIVE- Gov’t studying significant tweaks to income tax legislation: The government has begun drafting changes to the Income Tax Act to bring the legislation in line with international standards, Tax Authority boss Abdel Azim Hussein tells Enterprise. Don’t expect higher taxes: Hussein was careful to note that no changes are in the works to tax rates or brackets in a bid to ensure the country remains attractive to foreign direct investors. The government will consult with business and industry associations, including the Egyptian Businessmen’s Association and the Federation of Egyptian Industries, as well as with major accounting firms during the drafting process, he added.

The changes might be extensive enough to require drafting entirely new legislation, a senior official told us, suggesting that the 2015 Income Tax Act could be scrapped or significantly overhauled. The changes under study could impact how tax appeals are handled, the ministry’s internal tax committees, and procedures for filing one’s tax returns. The latter would be finalized after enacting the proposed law on new unified tax procedures, which is expected to pave the way for an electronic tax platform. The changes aim to support the government’s goal to grow tax revenues by 0.5% a year to reach the fiscal year 2019-2020 draft budget’s target of a tax base equivalent to 18-20% of GDP.

Other changes now on the drawing board:

  • Another look at how capital gains and shareholder dividends are taxed, which could pave the way for the return in 2020 of the capital gains tax on stock market transactions;
  • Introducing a new chapter in the tax code for the treatment of “internet-based markets” (i.e. the digital economy);
  • New tools to help clamp down on tax evasion;
  • A review of how tax incentives are structured.

It’s the latest in a basket of potential changes that could keep your finance department busy in the coming year. We were told last month that the Finance Ministry is looking to impose a mix of VAT, income, stamp, and developmental taxes on social media, e-commerce platforms and internet search ads. This move would require changes to a number of laws including the Income Tax Act. Reports also emerged in February that the House Planning and Budget Committee was discussing tweaks to the act which could change the tax code and rates on salaries. The act was most recently amended in February with changes to how banks and corporations account for income from investments in government debt.

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