Tax overhaul - Economy - Al-Ahram Weekly

Al-Ahram Weekly

28-01-2025

MPs approve three draft laws that seek to offer incentives to small investors, simplify procedures and speed up the settlement of tax disputes
Following lengthy discussion on Sunday, the House of Representatives approved three tax-focused draft laws offering new incentives to small-scale enterprises, unifying and improving tax services and speeding up the settlement of disputes.
'The drafts aim to improve the financial performance of the state and promote investment,' said House Speaker Hanafi Gebali. He expressed the hope that the laws would enhance Egypt's ability to attract international investment.
According to Finance Minister Ahmed Kouchok, the three laws are the first phase of a package of measures that will overhaul the tax system and ease the burden on taxpayers.
'The package has been discussed with key economic players and, on the basis of these discussions, has been amended to meet the needs of taxpayers and investors,' said Kouchok.
MPs gave final approval to a 15-article draft law granting tax incentives to businesses with an annual turnover of up to LE20 million. The original draft submitted by the government had placed the threshold at LE15 million. It was raised at the request of Abdel-Hadi Al-Qasabi, parliamentary spokesman of the majority Mostaqbal Watan Party, who argued the increase was necessary given high inflation rates and the depreciation of the Egyptian pound.
A report prepared by the Budget Committee said the draft bill seeks to support small and micro enterprises (SMEs) while expanding the tax base and integrating informal businesses into the national economy.
Article 7 states that businesses with an annual turnover below LE20 million will be exempted for five years from financial development fees, stamp tax, company registration fees, land registration fees and tax, and fees linked to credit facilities and mortgage contracts. Article 8 exempts the same businesses from capital gains tax on the sale of fixed assets and production machinery and Article 9 contains a blanket tax exemption on profits.
Article 4, however, exempts companies that generate 90 per cent of their annual turnover from consultancy services from the provisions of the law.
Mohamed Suleiman, head of the House's Economic Affairs Committee, said the draft legislation is in line with Egypt's 2014 constitution which requires that the government support small and micro-scale enterprises and start-ups. He pointed out that 'small-scale enterprises contribute 80 per cent of Egypt's GDP and play a leading role in creating job opportunities, meeting local market needs and boosting exports.'
Several MPs objected to Article 3, which stipulates that businesses must join the Egyptian Tax Authority's (ETA) Electronic Invoice and Receipt System to benefit from the package of tax incentives.
MP Talaat Abdel-Qawi criticised the law far including NGOs and civil society organisations involved in development projects as part of the private sector for tax purposes even though they are non-profit entities. He argued that many NGOs will find the requirement that they join the ETA's Electronic Invoice and Receipt System burdensome.
In response, Kouchouk said exempting entities from the Electronic Invoice and Receipt System would undermine the government's strategy to expand financial inclusion.
MPs also approved a draft bill that will allow taxpayers who failed to submit their tax reports by the deadline to file them without facing financial penalties.
A government-drafted explanatory note said taxpayers who fail to submit their tax reports on time currently face fines of up to LE1 million. Article 3 of the new law will allow taxpayers who failed to submit their tax returns for 2020, 2021, 2022, and 2023 to do so without incurring penalties.
The third law aims to expedite the settling of tax disputes within the framework of the ETA's shift to a digital system.
Deputy Chairman of the Budget Committee Mustafa Salem said the value of late tax payments had reached LE400 billion and 'hopes are high that the new law will help recoup this sum ahead of the ETA moving to a fully digital system.'
Kouchok told MPs that by streamlining the way in which tax disputes are resolved, the 11-article law will contribute to creating an attractive investment environment and building greater trust in the tax system.
'The law will also help the ETA settle accumulated tax disputes while moving away from a paper to a digital system,' said Kouchok.
He argued that the draft laws open a new chapter in the relationship between the ETA and the business community, based on partnership and support, and will allow the ETA to focus on upgrading its services and expanding the tax base to benefit the state, investors, and citizens.
* A version of this article appears in print in the 30 January, 2025 edition of Al-Ahram Weekly
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