Egypt discussing new tax plans
Egypt is considering new taxes on bank loans, share trading, company dividends and even advertising under broad new laws currently under discussion, Al Arabiya has learnt.
Lawmakers are currently engaged in secret talks on changes to Egypt’s tax law, which is currently being debated by the country’s Shura Council.
Al Arabiya has exclusively obtained details of some of the proposed changes.
According to Al Arabiya’s sources, the proposed changes include a tax of one Egyptian pound per 1,000 pounds on all bank loans and other forms of lending, with the cost to be evenly divided between the lender and customer. The proposed tax on bank loans would be imposed every financial quarter.
As a result of the leaks over the changes being discussed in Shura Council exclusively reported by Al Arabiya, the Finance Ministry was forced to announce the full changes to the law. The tax authority and finance minister are now contacting media to publicize these changes.
Other proposals under debate include a tax of one pound out of every 1000 on all financial transactions on the stock market. This would apply to both buying and selling of Egyptian and foreign securities with the cost of the tax to be borne by both buyers and sellers.
Traders on Egypt’s stock exchange have previously protested against reports that taxes on financial transactions could be introduced, and voiced concern over the effect it could have on stock market performance.
In December, Egypt announced plans to introduce a 10 percent tax on major transactions on the stock market, including IPOs and takeovers.
Additional changes to the tax law being debated could further unnerve investors. According to Al Arabiya’s sources a 10 percent tax on company dividends is being considered. This would apply to dividends and profits awarded to shareholders, with the exception of bonus shares.
New changes also being discussed would give the tax authority greater powers in determining the value of taxes to be imposed on profits from mergers and acquisitions and other corporate deals.
Under the new proposals, if it is proven that a particular deal is intended to avoid, reduce or delay taxes due, the tax authority can take measures to re-evaluate the profits derived from the deal in question, and amend the value of tax due.
Such a proposed change comes in the midst of a tax row between the Egyptian government and Orascom Construction Industries (OCI).
OCI has been in talks with tax officials to settle a 14 billion Egyptian-pound claim stemming from the 2007 sale of its cement business. The company didn’t pay taxes on the transaction because it listed the business on the stock exchange two months prior to the sale; Egypt didn’t have a capital gains tax at the time, which remains the case today, Bloomberg reported.
Other changes also include amendments to the income tax law passed last year, with the possibility of eliminating a 10 percent tax break being offered as an incentive for those paying back overdue or late taxes under the current law. The measure was intended to incentivize delayed tax payments but the proposed changes could remove that incentive.
Al Arabiya sources also say a tax of 20 percent may also to be imposed on all advertisements. This tax would apply to all forms of advertisements across all media platforms including cinema, television channels, radio and the internet.
Egypt’s Shura Council currently holds legislative power in the absence of a house of representatives which was dissolved in June of 2012 by the country’s highest court.
If approved, the changes to the tax system would form a key part of the Egyptian government’s economic reform program aimed at increasing revenue and cutting spending on costly subsidies in order to reduce the budget deficit.
Egypt’s deficit reached 8.2 percent of GDP between July 2012 and February 2013 according to finance ministry data. The economic plan is expected to be discussed with a delegation from an International Monetary Fund mission arriving in Cairo on Wednesday.