Egypt's Morsi Raises Sales Taxes and Stamp Duties

Egyptian President Mohamed Morsi, who holds legislative authority, announced sweeping increases in sales taxes and stamp duties on a wide range of consumer goods and services and amended Egypt's income and property tax laws. Income tax brackets were also modified, and the highest bracket was changed so that annual incomes above LE1 million (instead of LE10 million) are taxed at a 25 per cent rate. The president also issued a law levying a 10 per cent tax on Initial Public Offerings (IPOs), company mergers and acquisitions.

The measures represent the implementation of an economic programme that Egypt has proposed to the International Monetary Fund (IMF) in order to be eligible for a $4.8 billion loan. The measures are aimed at reducing public deficit through increasing state revenue. Morsi has already reduced subsidies on butane gas and electricity as part of a government austerity programme. Among other products, sales taxes were increased on steel, cement, soft drinks, beer and cigarettes.

Morsi also raised sales taxes on a variety of services, including mobile-phone services, air-conditioned transportation, and cleaning and security services, among others. He also doubled stamp duties on bank facilities and loans. A new scheme for duties on advertising was also put in place, with the highest bracket standing at 25 per cent instead of the previous 15 per cent flat rate.

The new legislation also stiffens penalties for tax evasion. As for the property tax law, the exemption level was raised from properties valued at LE500,000 to those worth LE2 million. This will become effective as of 1 July of next year. Single home owners are not exempted from the tax. The law levies a 10 per cent tax on annual rent for properties with market values of LE2 million after deducting 30 per cent of this value for maintenance purposes.

The following is a brief summary of the new changes to Egypt's tax structure:
- Steel rebars used for construction will be subject to a 10 per cent sales tax.
- Taxes on alcoholic beer will be increased from 100 per cent (with a minimum of LE200 per 100 litres) to 200 per cent (with a minimum of LE400 per 100 litres).
- The single tax on cigarettes will be raised from LE1.35 to LE2 per pack for locally produced cigarettes and to LE2.50 for imported cigarettes.
- Taxes on shisha (water pipe) tobacco will be increased from 50 per cent to 150 per cent.
- Taxes on local and imported wines will be raised to 150 per cent from 100 per cent.
- Taxes on cooking oil will be set at 5 per cent of the sale value instead of set per-tonne levies.
- Taxes on mobile-phone calls will be increased from 15 to 18 per cent.
- New sales taxes will be levied on fertilisers, pesticides and soft drinks, among others.

Income taxes
Modifications to the income tax structure will also be implemented, effective Sunday. The new Egyptian income tax structure will be as follows:

First segment (LE5000 or less): Exempted
Second segment (LE5000 – LE30,000): 10 per cent
Third segment (LE30,000 – LE45,000): 15 per cent
Fourth segment (LE45,000 – LE1 million): 20 per cent
Fifth segment (LE1 million or more): 25 per cent