Passing incremental income tax law hinders investments: MPs

Abdel Razek Al-Shuwekhi
3 Min Read

Members of parliament have rejected the government’s idea to impose an incremental income tax on citizens at the moment due to the negative impact this would have on attracting foreign investment to Egypt.

MP Yasser Omar said that imposing such a tax contradicts the decisions of the Supreme Council for Investment and would create a state of tax instability.

He added that the state has specified the income tax rate at a maximum of 22.5%. “An incremental increase of the tax on incomes would create a state of instability. Moreover, investors pay 10% of their profits to workers, and a 10% profit distribution. This means that the tax actually nears 42%.”

MP Talaat Khalil, member of parliament’s Budget and Planning Committee, said that the government must increase tax revenues by resolving the issues in the tax system to fight evasion as well as collecting late dues accounting for more than EGP 50bn.

Khalil added that tax revenues represents 13% of the gross domestic product (GDP), but should account for 20%.

Deputy Finance Minister for Tax Policies Amr Al-Mounir said that the ministry has begun to work on a bill to push late payers to pay their taxes.

Al-Mounir said in a previous press release that the total late dues owed to the Tax Authority register EGP 70bn, including EGP 25bn-30bn owed by government agencies, including national press institutions, and EGP 10bn owed by the private sector.

“The tax authority needs major developments to increase the efficiency of its workers who are not paid well enough,” Khalil said.

He believes that actual taxes do not represent more than 8%, with 5% being the percentage of the settlements between government agencies.

He added that there are cases of tax evasion—especially by workers in free professions, like doctors and lawyers—which wastes billions for the state. Moreover, there are wasted revenues due to the unofficial economy.

The House of Representatives approved the activation of the value-added tax (VAT) in September at 13%, to be increased to 14% in FY 2016/2017.

Talaat Khalil said that the tax system must be more disciplined.

MP Mohamed Badawy Desouky said that imposing incremental taxes hinders investment, especially at the present time.

He added that the crisis is related to the necessity of control over markets by the government with the provision of incentives in a way that ensures an increase in the supply of goods and services, as well as jobs, leading to an enhancement of living standards.

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