Ministry of Finance officials are in the process of preparing the regulatory bylaws of the new law seeking to end tax disputes. The bylaws are set to be issued by the minister of finance after the law’s publication in the official gazette.
Al-Borsa spoke with Deputy Finance Minister for Tax Policies Amr Al-Mounir, who said that the ministry will form a central committee under his management. The committee is responsible for the formation of sub-committees to come to terms, and to follow-up on work.
How will the ministry deal with the law seeking to end disputes after its presumed approval by the House of Representatives?
The law was approved by the House of Representatives weeks ago and will be applied the day following its publication in the official gazette. The law includes a text that allows the minister of finance to issue rules and operating procedures.
Will the law include reconciliation in the tax evasion cases?
The law would not include reconciliation in tax evasion cases, because evasion is governed by the rules contained in the Income Tax Act No. 91 of 2005. The new law will be limited to income and sales taxes, stamp duty, and fee development.
How will the law issued by the minister of finance be implemented?
We will form a central committee at the Ministry of Finance, under my management, that will be responsible for the formation of sub-committees to end disputes with the state. The central committee will follow-up on the sub-committees’ work. There will also be a technical office that will aid the central committee in follow-up procedures and making decisions. Additionally, we will issue a guideline to end the dispute in terms of actions, items, and tax treatment to unify tax basis of settling accounts. The central committee will follow a time frame for ending the conflicts.
What are the measures taken if a taxpayer requests to end a dispute?
We will suspend the review of the dispute for three months, with the force of law in various stages of litigation, whether courts, appeals committees, or internal committees. If the taxpayer proves to be committed during this time period, it is possible to extend the period for a further three months, but this must follow a decision by the central committee.
Is it possible to extend the period of ending disputes for an additional year?
The law has set the deadline for ending disputes to only one year, commencing from one day after it comes into force. Extending the period for another year will depend on the House of Representatives’ approval and the number of disputes resolved during the period of application.
How many sub-committees will be formed in governorates?
Thirty subcommittees will be formed in governorates, and they are subject to increase. These committees have full authority to resolve disputes, and we will be monitoring their performance. The law will extend to general taxes, sales, stamp duty, and fee development.
What is the expected outcome of the application of the law?
I expect about EGP 15bn, as there are currently 160,000 disputes in various stages of litigation. The law came at the behest of the tax community and therefore it is supposed to be an incentive to resolve disputes.
Will the income tax rate be modified?
There is no intent at the moment to amend the tax rate of 22.5%, but we are reviewing taxes on certain types of revenue.
Which professions are subject to the VAT?
All professions will be subject to VAT, with the exception of medical doctors, who will be exempted as they fall under health services that are exempted from the tax. However, they are subject to income tax. The only problem is that they do not pay their taxes and we will take actions to solve this problem in the upcoming period.
Some suggest that this procedure is unconstitutional.
The Constitutional Court is the only body that has jurisdiction over matters of constitutionality. We do not view this issue as unconstitutional in the least.
Do you think lawyers will face problems in applying the VAT?
We will consider this matter while developing the bylaws for the VAT and developing specific mechanisms to assess the tax.
What is the Ministry of Finance’s strategy regarding the issue of the land on the Cairo-Alexandria Desert road, which changed its activity?
This issue has two parts: the first is the committee for land recovery headed by Ibrahim Mehleb, and the other is related to the application of the dispositions estate tax, but this tax will be applied if the sale happened only once. That means it is a real estate investment activity and therefore will be subject to tax on commercial and industrial bases, or a tax on the funds companies.
A number of investors are facing issues in the application of Egypt’s neutral pricing principle. Can you suggest any solutions?
My top priority will be to restructure the agreements administration in the Tax Authority in the coming days to activate the neutral pricing principle. We will also update the instructions issued regarding neutral pricing in 2010 to comply with the recent instructions from the Organization for Economic Cooperation and Development (OECD).
To what extent does Egypt benefit from the application of neutral pricing?
Egypt will benefit from correctly applying the law in accordance with the principle of neutral pricing. This will support the application of conventions on transactions with foreign parties. Thus, according to anti-avoidance or tax evasion, the tax authority has the right to amend any deal with the main purpose of avoiding tax.
How will Egypt deal with the international agreements in taxation?
We are examining all agreements to comply with the rules of the fight against tax evasion, and I will represent Egypt in an international conference that will be held in France to discuss the convention put forward by the OECD .
To what extent does Egypt benefit from the multilateral convention?
Certainly, Egypt will benefit through the development of ways to combat international tax evasion and avoidance. Following this, we can modify our agreements in accordance with the OECD model and mechanisms in the coming weeks.
When will the principle of global revenue come into force?
The principle of global revenue exists in the Income Tax Act, but requires information exchange, which we are working on now with the OECD. We may also conduct some of the local legislative amendments to conform to the mechanism of information exchange and reciprocity, and we will discuss this measure with an OECD delegation that will visit Egypt soon.