Egyptian President Mohamed Morsi on Tuesday (May 21st) signed an amended income tax law, in the government's latest move to increase tax revenue for the current fiscal year.
The Shura Council, Egypt's top legislative authority, approved the amendments last week.
The new law groups taxpayers into five segments, exempting from taxes those whose annual income is less than 5,000 Egyptian pounds ($716); setting a 10% tax rate on incomes from 5,000 to 30,000 pounds ($716 to $4,294); a 15% rate on incomes from 30,000 to 45,000 pounds ($4,294 to $6,440); 20% for those earning 45,000 to 250,000 pounds ($6,440-$35,780); and 25% for incomes exceeding 250,000 pounds.
The new tax schedule is slated to go into effect with the disbursement of June salaries, said Sami Khairy of the Central Administration for Tax Inventory.
"The new amendments took into account the pressing social and economic conditions, and some exemptions were adopted," he told Al-Shorfa, noting the amendments pertain to Income Tax Law No. 91 of 2005.
Tax revenues are rising, with sales and income tax revenues combined reaching 161 billion pounds ($23 billion) for the period July 2012 through mid-May 2013, compared to 158 billion ($22.6 billion) in the same period of the previous fiscal year, Khairy said.
Tax revenues are expected to reach up to 200 billion pounds ($28.6 billion) by the year's end, he said.
The Ministry of Finance, in collaboration with private banks, also is giving taxpayers the option of paying their taxes online via the Tax Authority website, which offers a number of services as well as tax-related information, Khairy said.
"The amendments to the tax law are fair to low- and middle-income Egyptian citizens, and thus achieve real social justice," said Ali Sharaf of the Egyptian Financial Supervisory Authority's research and development department.
He told Al-Shorfa he expects the new amendments to boost the Treasury.
The amendments were "necessary in this period to accompany the new disposition towards subsidising some consumer goods and fuels, which may help with IMF negotiations for the pending $4.8 billion loan", he said.
The International Monetary Fund (IMF) has set deficit reduction as a prerequisite to granting the Egyptian government the loan.
Among notable amendments to the tax law, according to Sharaf, was setting all corporate tax rates at 25%. Previously, companies with income less than 10 million pounds ($1.4 million) had a 20% tax rate and companies with income greater than that had a tax rate of 25%.
"These amendments added a competitive advantage to Egypt among African countries, whose corporate tax rates [are as high as] 28.6%, an advantage that is expected to attract investment capital in the coming period," he said.
Cairo University economics professor Mahmoud Sultan said the new amendments are "narrow [in scope]" and "it would have been more beneficial if they provided more [tax] segments".
The second segment, for example, which covers incomes from 5,000 to 30,000 pounds, does not do justice to people with lower incomes, he said, but is fair to people whose income touches the upper limit. "It would have been more beneficial to split that segment into two," he said.
"In order to support handicrafts and small businesses, those categories should have been included in the exempted segment so as to restart the economy and the production process," he said.
Despite Sultan's reservations about the amendments, he said proceeding with their implementation is "extremely necessary, as this reflects a serious government policy that lays a sound and clear economic foundation and provides evidence of the stability of the tax system".
This "will encourage new investors to enter the Egyptian market and restore confidence in Egypt's economic policy", he said.