In a move to reduce the Egyptian budget deficit, the government has decided to levy tax on investments. The government has decided to levy tax on dividend payments and?on profits earned from??mergers, acquisitions, and asset revaluations. However, there is no tax for profits earned through stock exchange trading.
The government has also decided to levy tax on individuals and companies whose earnings cross 10 million Egyptian pounds (Dh6.1m) a year. This move has sparked anguish?in the business community. The business community fears it would dampen the prospects of recovery after the civil war.
According to Mohamed Abdel Salam, chairman of Egyptian stock exchange, the stock exchange is on the verge of recovering from?a liquidity crisis. The exchange has been taking steps to bring back Arab and other foreign investors. The timing of such a move can deter foreign investors from investing in the country. He also said that it is yet to be seen if the revenues received?from?taxing companies and individuals can?outweigh the potential foreign investment following this law.
Following announcement, shares of Egyptian companies has reached rock bottom. The benchmark EGX 30 Index has also declined 2.6 per cent. Mohamed Abdel Salam has planned to send a report on the consequences of such a move to the government and military.
The Gulf companies operating in the country are also unhappy with the new tax system. According to Khaldoun Tabari, the chief executive of the UAE engineering company Drake & Scull International, said that such a decision should have been given?time for ?before making it a law.
The expenditure for the fiscal year is forecasted at 86.5 billion pounds, while the deficit for the country is estimated at 10.9 per cent of GDP.