Egypt Cabinet Approves Draft Law to End Tax Exemptions for State Bodies

In a recent development, Egypt’s cabinet has given the green light to a proposed law aiming to remove tax exemptions for state entities in hopes of boosting private investment, as per a statement released by the cabinet on Wednesday. However, it seems that the law still preserves certain privileges currently held by the army.

Amid a challenging foreign currency shortage, Egypt has been making efforts to attract increased investments from both foreign investors and Egyptian nationals.

Many potential investors have been holding back due to worries that state-owned enterprises, including those with military ownership, may have an unfair advantage in competition by exploiting tax exemptions and other special privileges.

The International Monetary Fund in a $3 billion financial support agreement signed in December urged Egypt to level the playing field between the private and public sectors.

“The approval is part of the Egyptian state’s desire to improve the investment climate and support private sector participation in various economic activities,” the cabinet statement said.

Some activities would remain tax exempt, including those enshrined in international agreements, those that provide basic infrastructure services, and those needed for national security, it said.

The scrapping of exemptions would be implemented “without prejudice to … exemptions prescribed for works and tasks related to the requirements of defending the state and protecting national security,” the statement said.

The military, as well as other security institutions, are exempt from value-added taxes for goods and services needed for armament, defense and national security under a 2016 law, from real estate taxes under a 2015 decree, from income taxes under a 2005 law and from import tariffs under a 1986 law. The Ministry of Defense can decide which goods and services qualify.

The new draft law still requires approval by parliament and the president.

(Reuters)