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Egypt moves to close tax loopholes as losses approach $10bn

Published: Updated:

Egypt is moving to clamp down on tax evasion and boost collections with a series of proposals aimed at stemming the treasury’s losses, which are estimated at $10 billion since 2000.

Mamdouh Omar, chairman of the Egyptian Tax Authority, said the amendments were aimed at high earners and those who exploit loopholes in current tax regulations.

Legislative amendments put forward include incentives for unregistered companies to open a tax file, and equal taxation imposed on non-resident workers in Egypt, the tax authority said.

Under the plans, unregistered companies in Egypt would be given 18 months to formalize their status and open a tax file. Companies doing this before the deadline would become exempt from taxes owed from previous years.

The Egypt Tax Authority made reference to tax exemptions granted to self-employed people, and suggested some may be abusing the system. The authority said it would “close this loophole” by imposing a maximum salary limit for those benefiting from such exemptions. The proposed limit is 50,000 Egyptian pounds per year.

Share dividends would be taxed under the new proposals, closing an accounting loophole whereby such dividends could be moved offshore and not taxed in Egypt. The proposals include a tax exemption on bonus shares, as well as on share dividends for companies registered in free zones within Egypt.

Tax exemptions for non-governmental organisations would be reinstated under the new proposals, the authority said.

The amendments were presented to the country’s upper parliament, known as the Shura Council, according to a statement issued by the Egypt Tax Authority.

The council is expected to discuss the proposed amendments to the laws today and tomorrow, and may suggest changes to the proposals.

Tax evasion and poor enforcement of existing laws has cost Egypt at least 66 billion Egyptian pounds ($9.7bn) since 2000, according to The National.