Daily News Egypt

New incentives to maximise tax revenues, comprehensive restructuring of IRS: Finance Ministry - Daily News Egypt

Advertising Area

Advertising Area

New incentives to maximise tax revenues, comprehensive restructuring of IRS: Finance Ministry

New legislation stipulates that collecting taxes protects the rights of the state, taxpayer

Ministry of Finance officials are preparing a new package of incentives that will contribute to maximising tax revenue based on the training and qualification of tax collectors, in order to give them bonuses related to the value of the proceeds, according to a ministry official.

Deputy Finance Minister Amr Al-Mounir for tax policies said that a comprehensive restructuring of the Internal Revenue Service (IRS) will be carried out in the coming period. The tax policies and the governing legislation of the tax community will be reviewed, which is supported by President Abdel Fattah Al-Sisi and Prime Minister Sherif Ismail.

Deputy Minister of Finance Mohamed Meit said that Egypt is still one of the countries with the lowest tax ratio to GDP. The international conventions state that taxes should represent 30-40% of the total GDP. However, in Egypt, this ratio does not exceed 8% after deducting the government’s sovereign entities taxes. This ratio is very low and should be lifted.

Minister of Finance Amr El-Garhy said that tax revenue currently represents only 13% of GDP. The minister pointed out that they target to increase this ratio to 17% during the current fiscal year.

The Ministry of Finance estimates the tax revenues for this current fiscal year, which begins 1 July in Egypt, to be EGP 433bn.

The new legislation is currently under formulation and being negotiated with the concerned parties, Al-Mounir said. The new legislation contributes to unifying all tax procedures, protecting the state’s right to collect all taxes, and limiting tax evasion.

The new legislation will include a tax administration that provides guarantees for the taxpayer to receive the best possible service. Unifying the value-added tax (VAT) and income tax procedures paves the way for implementing the new unified tax procedures law.

Egypt suffers from a severe deficit in its general budget, as its resources are unable to cover the increasing expenses each year. Thus, the general debt represents 98% of the GDP, under the pressure of the decline of foreign investors and tourist influx to Egypt since January 2011, which are a key source of foreign currency.

The tax disputes file is currently under review in order to resolve a large number of disputes in the coming period. This will increase tax revenues, assure the financiers, taxpayers, and reduce tax evasion, according to Al-Mounir.

The value of the uncollected tax arrears is EGP 70-80bn in recent years—the state intends to reduce the fines on those arrears if their owners repay them within a certain period.

Sources at the Ministry of Finance disclosed that the ministry is discussing the possibility of dropping part of the tax arrears and offering reconciliation for the owners if they are bankrupt and completely unable to repay.

Al-Mounir said that they are executing a full survey of all buildings and units in order to design a unified model which allows tax collectors to perform their duties smoothly and provide services to the financiers in a suitable atmosphere.

The tax system in Egypt suffers from a clear lack in its capabilities across most of the sites, and the problem requires a five-year plan to be solved. Reform is not only about replacing who is in charge, according to Al-Mounir.

Al-Mounir added that after deciding on the VAT law, the tax system will be subjected to a radical reform in coordination with all stakeholders.

Advertising Area

Breaking News

No current breaking news

Receive our daily newsletter