A presidential decree in Egypt to lower the tax ceiling for companies and individuals to 22.5 per cent from 25 per cent would boost investor sentiment, analysts said yesterday.
President Abdel Fattah El Sisi’s announcement on Sunday was accompanied by another decree to halt a 10 per cent tax on capital gains for two years.
“I think the announcement added clarity about the tax rate. Now investors have clarity,” said Angus Blair, the chief executive of Signet, a regional consultancy based in Cairo.
“I think cutting the rate is useful when you want to improve [investor] sentiment.”
The new tax rate of 22.5 per cent is for those with an annual income of 200,000 Egyptian pounds (Dh93,590) or more. The previous tax threshold was 250,000 pounds.
Commenting on the decree to halt a 10 per cent tax on capital gains for two years, Mr Blair said that “the economy will be in a better shape to take this added source of revenue” after two years. The decision to eliminate the tax on capital gains was announced in May, leading Egypt’s stock exchange to soar to a two-year high at the time.
However, Mr Blair said Egypt’s government needed to expand its revenue base by having other forms of levies such as the value-added tax (VAT) to support the government’s expenses.
Currently, the government is debating the roll-out of the long-planned VAT.
The levy may prove unpopular among businesses, which are already suffering from five years of economic stagnation. But the tax is crucial for raising funds and demonstrates Egypt’s commitment to long-term economic reform.
Cairo says that it is relying on the VAT to keep its budget deficit below 9 per cent of GDP for the 2015-16 financial year that began on July 1.
selgazzar@thenational.ae
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