The House of Representatives needs to move quickly if it wants to prevent every business with more than 10 people on payroll from being hit with a new(ish) 1% tithe on net profits as the Manpower Ministry looks at how enforce a decision published in the Official Gazette (pdf) on 22 May. The decision orders ministry inspectors to inform businesses with 10 or more employees that they have one month to pay the tithe. The fee is supposed to flow into the ministry’s training fund.

MPs have a way out if they finally pass proposed revisions to the Labor Act, which would see the 1% hit to net profit replaced with a new tax that would cap the per-employee contribution to the training fund at EGP 50 — a much more reasonable figure.

So what, exactly, is this 1% tithe on net profits? Article 134 of the current Labor Act of 2003 requires businesses with at least 10 employees to pay 1% of their net income into a Manpower Ministry “training fund.” The fund is supposed to finance job skills training programs and training centers nationwide.

You’re not paying that 1% fee now — it’s been held in abeyance because of a lawsuit. The fee had been the subject of a lawsuit that made its way to the Supreme Constitutional Court back in 2009 after ExxonMobil filed suit against the government, claiming the tithe was unconstitutional. The Manpower Ministry’s decision to start collecting the tax comes after the SCC issued a ruling in favor of the government in March of this year, saying the article does not violate the constitution. Under the court’s ruling, ExxonMobil is required to pay the ministry by the time the government closes out its budget at the end of the fiscal year — ie: 30 June, the last day of this month. That explains the one-month timeline in the Gazette.

KEEP CALM- Nothing is set in stone — yet: The Manpower Ministry is still sorting out the details of how the tithe will be enforced, a government source with insider knowledge tells Enterprise. “The ministry’s counsel is currently working on the mechanisms for enforcing the article,” he told us, declining to say more.

Until the ministry speaks, there remains the risk that the tithe will be collected — and that it could be retroactive. “This point [retroactivity] still isn’t clear and will require further reading and guidance from the government’s legal counsel,” a member of the board of the ministry’s training fund tells us. A top advisor to the National Council of Wages, though, tells us that it is “unlikely that the decision will be applied retroactively.”

THE SAVING GRACE: The new Labor Act would do away with the tithe — if it passes the House. Article 19 of the proposed New Labor Act (pdf) would see the 1% tithe replaced by a monthly tax of 0.25% on salaries covered by social ins. The tax per employee would be capped at EGP 50 per month, with an EGP 5-per-person floor. If, for example, a company has 100 employees covered by social ins. the maximum it would pay the ministry’s training fund under the new Labor Act would be EGP 5k per month.

So where is the new Labor Act? Stuck in parliament — and that’s the risk to business. Sources at the House tell us the draft act is still in committee-level discussions during a busy season for the House — MPs are focused right now on higher priority legislation including the state budget (see separate story, below). The bill earned approval in the Senate, the nation’s upper house of parliament, in February, as we reported at the time — and it doesn’t seem to have moved since.

NEED A REFRESHER on the key provisions of the proposed labor act? Read our in-depth coverage here.