By Abdel Razek Al-Shuwekhi
The Federation of Chambers of Commerce’s (FEDCOC) Securities Division is moving to appeal the recently approved stock market tax, according Mohamed Maher, a member of the division as well as deputy head of the Egyptian Capital Market Association.
Maher said the law constitutes a “double taxation”, as companies pay taxes on their earnings before distributing coupons for net profits.
The Securities Division held an emergency meeting on Monday to discuss the tax bill on stock market transactions. The cabinet has forwarded the bill to Adly Mansour for his approval.
According to Maher, the government must choose between returns made on the tax’s application and the cost of its application. Its expected revenues do not exceed EGP 3.5bn annually, he said, whereas the tax will be very costly in terms of its effect on the investment climate and the stock exchange, as well as its ability to remain a source of cheap financing versus bank borrowing.
The law will not only impact companies listed on the stock exchange, but will have spillover effects as well, he added.
Regarding coordination between the Ministry of Finance, the stock exchange, and Egyptian Capital Market Association, the vice president noted that “Dimian called for a meeting in which we all informed him of the negative effects of applying the law.”
Despite the law’s disadvantages, the Ministry of Finance has insisted on its application to reduce the budget deficit, according to what the minister told them in the meeting, telling them there are two ways to reduce the deficit, one which includes imposing the tax on stock market transactions, the other subsidy cuts.
During the emergency meeting for the Security Division of the Federation of the Chambers of Commerce, the members asked to halt daily trading last Wednesday and Thursday, days which recorded major losses. Awny Adulaziz, Chairmen of the Securities Division, said that the demands of some to cancel daily trading is hard to implement and must be settled by Misr for Clearing.
The Egyptian stock indices have tumbled in recent days, with trading closing on Sunday marking the end of three days of losses amounting to EGP 40bn of market capitalisation on fears of the stock market tax.
Rania Yacoub, a board member of Interim President Adly Mansour’s advisory council, asked the president not to sign the law.
Ashraf Khairy, another member of the Securities Division, said: “There are some companies that have benefited from the leaked news of the finance ministry’s intention to impose the tax stock exchange profits.”
Khairy demanded the disclosure of the names of companies that sold during Wednesday and Thursday trading.
The Egyptian Cabinet referred the bill to the president to sign once amendments are made.
The cabinet approved a dividend exemption on bonus shares retained for any length of time. It also agreed to raise the exemption limit for cash dividends belonging to natural persons from EGP 10 thousand to EGP 15 thousand, a move intended to benefit small investors.