A more generous income tax break could be in the offing: President Abdel Fattah El Sisi has directed the government to raise the personal income tax exemption threshold to EGP 36k from EGP 24k currently, Ittihadiya said yesterday. Companies account for the majority of what the government collects under the tax, charging and remitting it as wage taxes on every person they employ.

This is more than we expected: The government said earlier this month that it plans to raise the exemption threshold to EGP 30k from 1 April.

SOUND SMART- There are technically two income tax exemptions in Egypt. Everyone, regardless of income, pays no tax on the first EGP 9k of their income. People who earn less EGP 600k a year also have a 0% tax band on top of that, which is currently set at EGP 15k. Together, these exemptions mean that employees in the lowest income bracket are not subject to wage taxes on the first EGP 24k of their income.

Both of these exemptions will increase under the proposed changes: The personal allowance will increase from EGP 9k to EGP 15k, and the 0% tax band will rise from EGP 15k to EGP 21k. This will mean that lower earners will pay no tax on the first EGP 36k of their incomes.

The changes are expected to impact some 22 mn people, a source at the Finance Ministry told Enterprise yesterday.

The new higher rate tax band is here: Taxpayers earning more than EGP 800k a year will pay tax at a new higher rate of 27.5% under the changes, the source told us. We first heard about the proposals for a new higher rate tax band last year.

Anything over EGP 36k will be taxed according to the following rates (inclusive of the EGP 9k personal allowance), our source told us:

• Incomes between EGP 36,001-45,000 will be taxed at 2.5%;
• The following EGP 45,001-60,000 will be taxed at 10%;
• The following EGP 60,001-75,000 will be taxed at 15%;
• The following EGP 75,001-215,000 will be taxed at 20%;
• The following EGP 215,001-415,000 will be taxed at 22.5%;
• The following EGP 415,001-800,000 will be taxed at 25%;
• Anything over EGP 800k will be taxed 27.5%.

The tax breaks could be applied as soon as next month, head of the Tax Authority’s central administration, Saeed Fouad, said in an interview on Kelma Akhira last night (watch, runtime: 10:15). The measures still need cabinet approval before heading to the House, he said.

The cost: The tax cuts will cost the public purse more than EGP 10 bn, our source said. The government will recoup some of this with the new higher rate band but this is expected to bring in only EGP 2 bn, they said.

BUDGET WATCH-

The government has trimmed its GDP forecast for the coming fiscal year and will now target 5.0% growth in FY 2023-2024, down from a 5.5% projection at the end of last year, according to the Ittihadiya statement. This came from Finance Minister Mohamed Maait, who shared some of the key targets in the upcoming budget during a meeting with President El Sisi. The ministry is now looking at a 2.5% primary surplus in 2023-2024, up from its 2.0% forecast in December, and a 6.4% budget deficit. The deficit is expected to widen to 6.8% of GDP this year from 6.1% in FY 2021-2022.

In + out: The Finance Ministry is projecting revenue growth to outpace spending. Figures in the draft budget see revenues jumping more than 31% to EGP 2 tn and spending rising 30.5% to more than EGP 2.8 tn, Maait said.