(DNE Photo)
The government increased the expected amount of tax revenues to be collected during the 2014/2015 fiscal year to EGP 364bn compared to EGP 358bn last year, representing a 1.6% increase according to Finance Minister Hany Kadry Dimian.
The government has taken measures that include reforming the real estate tax law 196/2008 and the Presidential Decree to impose a temporary 5% tax on incomes exceeding EGP 1m annually for a period of three years. Preparations are being made to amend the income tax law as well, according to astatement from the Ministry of Finance.
The informal economy is one of the most important factors increasing tax revenues according to Dimian, who said that it “forms 40% of the Egyptian economy.”
The total tax revenue goal in the budget for FY 2014/2015 amounts to EGP 364bn, the minister said.
The Ministry of Finance aims to integrate 7% of the informal economy into the tax system, said Ahmed Abdel Rahman, president of the Anti-Tax Evasion Sector of the Egyptian Tax Authority.
He added that the goal for profits gained from the formal economy ranges between EGP 2-3bn, if 20% of the market is incorporated into the tax system within three years.
Incorporating 7% of the informal economy into the tax system in order requires an increase in the number of tax departments to 150 inspectors, whereas currently only 24 exist. More computers will be necessary as well, said Abdel Rahman.
The Egyptian Tax Authority has offered incentives to individuals and companies to join the tax system. “We will request that the penalty for tax evaders be increased from a misdemeanour to a felony, as there must be a deterrent to accompany the incentives,” Abdel Rahman said.
The total proceeds gained by the Anti-Tax Evasion Sector over FY 13/14 amounted to approximately EGP 450m according to Abdel Rahman.
Reda Issa, economic researcher at the Egyptian Centre for Social and Economic Rights, argued that Egypt’s tax system requires meticulous amendments. The real estate tax law is flawed, and the tax base must be unified in order to combine each taxpayer’s properties, he said.
“The formal economy is complicit in the persistence of the informal economy, as purchases are made without formal bill records,” he added.
Issa expects that the government will issue the value-added tax law next December, and that the associated revenues will range between EGP 15-20bn.
