Earlier this month, the House of Representatives—the lower house of Egypt’s Parliament—approved a bill presented by the government concerning the partial waiving of overdue charges, additional tax, interest and suchlike penalties on non-criminal financial violations.
A House committee formed by the planning and budgeting committee and the bureau for constitutional and legislative affairs issued a report highlighting the bill’s raison d’être and objectives. The report explained that the Ministry of Finance, while keen on improving monetary performance and collecting all dues to the State treasury, looks to boost tax revenue of principal taxes, fees, penalties or additional taxes, even as it eases the burden on taxpayers and adheres to its current policy of limiting and swiftly resolving tax disputes; the objective being to build trust between tax authorities and taxpayers. The government is moreover keen on alleviating the financial and tax burdens bruising the business community on account of the current extraordinary global situation which reflects on the Egyptian economy, stressing out businesses and compounding financial distress.
The bill presented to the House of Representatives suggested waiving 50 per cent of the overdue charges and additional tax stipulated by the current law, provided the taxpayer pays the principal tax before the new law goes in action. The remaining 50 per cent of overdue charges would be paid over six months that begin on the date the law goes into action. We are still waiting for the official Gazette to publish the text of the law passed by the House of Representatives, and the bylaws to be issued by the Minister of Finance to specify the details of the implementation of the law. Until then, I would like to jot my remarks on the law.
The percentage of the overdue charges and additional tax to be waived by the tax authorities still hinges on the final draft of the law. The bill presented by the government suggested a 50 per cent waiver, whereas news circulated following passage of the law said it had been raised to 65 per cent. Experts have suggested waiving the entire overdue charges, given the financial distress and increasing burdens shouldered by businesses and economic entities addressed by this law.
The law stipulates waiving a percentage of the overdue charges in case the taxpayer pays all overdue taxes before a certain deadline. Yet the law makes no difference between a taxpayer whose legal financial statements reveal profits, and another whose business suffers losses. In the first case, partial waiving of the overdue tax charges could fulfil tax justice. But in the second case, tax justice requires the waiver of the entire overdue charge.
If it is not possible to waive the full amount of the overdue charge, whether for all taxpayers addressed by this law, or for those whose businesses suffer losses, why not create a progressive rate for overdue charges as in case of progressive income tax rates that increase with the increase of taxpayer’s income bracket? In case the law stipulates a 50 per cent waiver of overdue charges, will the purpose and spirit of the law be served by placing on equal footing a taxpayer who owes EGP100,000 to be reduced by 50 per cent to EGP50,000, and another with a EGP1 million debt to be reduced to EGP500,000? I believe that if we are serious about serving the spirit of the law, a progressive rate list of overdue charges should be drawn. The lower percentage of waiver should be granted to the lesser penalties, to be gradually increased on successive brackets of all taxpayers.
I hope the Minister of Finance and the tax authorities would consider these suggestions, with the aim of steadying production and economic institutions, and preserving their investments, businesses, and the job opportunities they secure.
Watani International
15 July 2022