Mostafa Abdel Qader, chairman of Egypt’s Tax Authority, requested that tax exemptions that Egypt has granted for decades be eliminated, stressing that Egypt has not reaped benefits from them and that they are a “type of intellectual colonisation”.
“The imposition of taxes on dividends and capital gains represent a bigger step towards achieving greater justice,” Abdel Qader said, noting that this tax takes into account the economic dimension before the financial one.
“I am against cancelling tax breaks in a random fashion,” said Omar El-Shenety, executive director of Multiples Investment Group. He pointed out that removing the exemptions without consulting the business and finance community could lead to lawsuits filed against the government due to changes made to tax legislation after the investor already conducted feasibility studies.
Al-Shenety added: “Tax breaks are important, but they are not a crucial decision-making factor as to whether an investor enters the Egyptian market or not.” The key considerations that investors take into account, he explained, are political and security stability, the state of the currency, and the existence of a clear government plan for dealing with investors that protects their rights and the rights of the state.
Al-Shenety stated: “I do not oppose the cancellation of tax exemptions absolutely but it requires proactive steps from the government to ensure that the investor is not harmed and to give him/her other advantages such as speedy litigation and the improving of the business environment and a minimum of political stability and security.”
During a seminar on Saturday evening organised by the Young Businessmen Association, titled “Raising Awareness for Tax Legislation Changes”, Abdel-Qader said that stock market investments come in two forms. Long term investment earns periodic returns, and many countries impose fewer taxes on this type of investment than short-term investment. As for short-term investment, the government imposes taxes on profits and dividends at a rate of approximately 10% of year-end net profit.
Abdel-Qader added that Egypt needed a mechanism to eliminate tax evasion, especially since in many cases, tax evasion can be legal. He pointed out that the new tax law will apply the principle of universality of revenue for investors who own holding companies in Egypt and have subsidiary companies outside of Egypt.
The principle of universality of taxes was in effect previously. For example, a doctor who owns a clinic in Egypt and travels abroad in order to practice will be taxed for that income. However, Egyptians abroad who do not own a company will not be taxed accordingly, Abdel-Qader said.
He pointed that the new law harshly punishes tax evaders with sentences ranging from 5 to 10 years and urged the community to report tax evaders.
Mahmoud Farag, chairman of the Finance Committee in the Association, said that the regularity of the tax community is in the interest of all parties, pointing to the importance that laws should take into account the fostering of a competitive business environment and encourage investors to undertake new projects.
Farag added: “Tax legislation should be organised, stimulating, and successful. Its role should not be confined to collection.
“Workshops will be arranged where young businessman submit their observations on the new tax law and offer perspectives on how to avoid gaps.”