(Abdelazim Saafan/DNE Photo)
By Muhammad Mahrus
Finance Minister Fayyad Abdul-Moneim announced the formation of a committee including officials from his ministry and the Central Bank of Egypt to diffuse concerns by the banking sector over taxes on loan loss provisions.
Abdul-Moneim said that the committee’s formation stems from the ministry’s keenness to help stabilise the country’s banking sector, which he said is considered the main pillar of the Egyptian economy, and boost its prospects for growth. He also underlined the importance of coordinating with Central Bank Governor Hisham Ramez on issues involving the country’s fiscal and monetary policies in order to help promote the growth of Egypt’s economy.
A law that was recently passed by the Shura Council to cancel the tax deductibility granted to 80% of loan loss provisions held by Egyptian banks has stirred an outcry from the sector’s officials. The bill, originally presented by a Freedom and Justice Party member of the congress, is claimed by bankers to hurt the inflow of investments to a country that is already grappling with an ailing economy.
Loan loss provisions are expenses set by banks to cover estimated losses on loans due to defaults and nonpayment. The combined total of provisions in the Egyptian banking system exceeds some EGP 57bn.
Abdul-Moneim said that during its last meeting, the committee discussed the concerns of commercial banks operating in the Egyptian market about the new law. He added that officials from both sides had reached an agreement regarding this matter and that attempts would be made during the committee’s next several meetings to come up with legal measures to address these issues.
Abdul-Moneim praised the efforts of Central Bank and the recent paradigm shift seen in its fiscal policy, which he says has gone a long way to help strengthen the government’s confidence in its ability to stabilise the country’s banking sector. This policy, he said, would do much to help attract new foreign investment into Egypt.
However, Abdul-Moneim made a point of emphasising that recent quotes attributed to him and one of his advisors in the Ministry of Finance seen recently in a number of Egyptian newspapers, in which he claims that differences in opinion exist between the ministry and the Central Bank, are in fact fabricated and false. He went on to state that the country’s Finance Ministry appreciated the role being played by the Central Bank in adopting fiscal policies that will help promote growth and stability throughout Egypt’s markets.
Osama Towekel, President of the Large Taxpayers Center within Egypt’s Tax Authority, recently hosted a meeting attended by officials from the Federation of Egyptian Banks (FEB), to review the contents of a report released on the FEB’s stance regarding amendments set to be implemented on the legal regulations of Egypt’s stamp tax law. Such amendments would re-determine how stamp taxes on loans and credit lines would be applied. Methods to establish new calculation mechanisms to determine such tax rates, in ways that are compatible with the computer operating systems used by the country’s banks, were also discussed, in an effort to prevent banks from having to rework their systems and suffer additional burdens.
