CAIRO: Interim President Adly Mansour issued a 5 percent tax on annual incomes exceeding 1 million EGP ($142,000) effective for three years staring this year, presidential spokesperson Ihab Badawy said in press statements Thursday.
Minister of Finance Hany Kadry set the expected annual revenue from the 5 percent-tax at 2 to 3 billion EGP, according to a Wednesday Cabinet statement.
Welcoming the new tax, Ahmed Heikal, the Chairman of Citadel Capital, described government’s decision to impose the tax as “a 100 percent good,” Youm7 reported Thursday.
Financial analyst at HC Omar Radwan also welcomed the new tax in an interview with The Cairo Post, expressing hope that its revenues could help provide liquidity to cover the budget deficit.
The decree stipulates that private and legal personalities who would pay this tax may request that their contribution fund educational, health, housing, infrastructure or other service projects across Egypt, in coordination with the Minister of Finance, according to Badawy.
This additional tax is part of the government’s actions to expand the scope of income taxes in accordance with the constitution and to ensure community participation in the implementation of service projects that would mostly benefit the poor and the middle class, ultimately achieving social justice, Badawy said.
Government tax amendments to improve ailing economy
Since the departure of former President Hosni Mubarak in the wake of the January 25 Revolution in 2011, Egypt has been suffering dramatic economic troubles registering a budget deficit of over 240 billion EGP during the previous fiscal year (2012/2013.)
Kadry previously announced that he would amend the tax system by imposing progressive taxes, wealth taxes and real estate taxes as a step for covering the budget deficit and increasing Egypt’s tax revenues.
On Monday, the Cabinet imposed a real estate tax on units with over 24,000 EGP in net annual rental value and commercial units with less than 1,200 EGP.
The buildings owned by registered associations, labor organizations, educational institutions, hospitals, clinics, shelters, nonprofits, political party headquarters and trade unions also will be exempted from paying real estate taxes.
Tarek Farrag, an advisor to the finance ministry on real estate taxes, said that the new real estate tax will bring in between 3 billion to 4 billion EGP annually, according to a phone interview with Ala Essam Masr TV Channel.
The government was also planning to impose a 10 percent annual capital gains tax on stock market profits, cash dividends and bonus shares, but this intention was met with a sharp decline in the Egyptian Exchange (EGX,) recording its biggest daily loss in almost a year on Sunday.
The Cabinet convened late Sunday to discuss amendments to the proposed tax.
“The meeting reached a number of amendments, first of which is that bonus shares will not be taxable with no need for a time-limit minimum to retain investors. Secondly, the amendment that the tax on dividends will be a minimum value of distributions at 15,000 EGP,” EGX chairman Mohammed Omran said in a Monday statement.
EGX witnessed a significant rebound in the days following the Cabinet’s meeting.
Additional reporting by Yasmine Samra and Ahmed Abu Shady.