(DNE Photo)
Minister of Finance Hany Kadry Dimian issued Decree 172/2015 on Tuesday to amend the executive regulation of the income tax law.
Chairman of Tax Authority Mostafa Abdel Qader announced, in a Sunday meeting with representative of the Egyptian Capital Market Association (ECMA), that they have concluded amending the regulation. It will include imposing tax on stock market capital gains and dividends for only one time, which is 10% of net profits at the end of the fiscal year.
The executive regulation’s amendment entails imposing a 5%-10% tax, depending on the circumstances, on dividends achieved by an individual who has a capital market portfolio and whose transactions do not exceed EGP 5bn during the tax period.
As part of the government’s target to increase tax revenues by EGP 10bn and to reform the tax system, the government imposed at the beginning of the current fiscal year a 10% tax on capital gains and dividends. Dimian said at that time that the tax comes as part of the government’s plans to broaden the tax base, allow for increased social spending, and achieve financial stability.
Experts criticised the imposing of the tax. Head of the Federation of Egyptian Chambers of Commerce (FEDCOC) Ahmed El-Wakil said at that time that the tax will “destroy the investment climate for years”. He added that it will raise unemployment rates and weaken the value of the pound.
Before imposing the tax, Egyptian stock market transactions were entirely exempted from tax on profits. They were distributed both monetarily and in the form of bonus shares to shareholders of the listed company.
Last May, the government cancelled the stamp tax, which was a 1% tax collected on stock market transactions for every purchase and sale. The tax brought in EGP 300m in the last fiscal year for the state treasury.
Following the imposition of the tax, the budget revenues have increased in July and August 2014 by 0.7% to register EGP 34.4bn. The finance ministryattributed the increase to a surge in revenues of taxes on incomes and capital gains by 39.8%, recording EGP 7.8m.
The government is aiming to collect EGP 24bn from the total tax arrears recorded during the current fiscal year, compared to the 16bn collected during the past fiscal year. The government has 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.
