Finance Minister Hany Kadry (Photo: Al-Ahram)
Egypt's economic ministers have agreed to cut the income tax ceiling to 22.5 percent for individuals and corporations, from the current level of 30 percent to stimulate investments, the country's minister of finance announced on Tuesday.
The proposed legal amendments are set to be approved by the full cabinet in Wednesday’s session, and will be applied on tax returns for 2015 which will be submitted the following year, said Minister of Finance Hany Kadry.
The new tax rate will also apply to businesses that will be established in special economic zones after the proposed reform comes into effect, Kadry explained in a televised interview on Tuesday evening.
Existing businesses in special economic zones in Egypt will continue to pay income tax at a rate of 10 percent currently applied in such zones, said Kadry.
The new unified tax rate will apply to the Suez Canal Corridor mega project, which will be located in one such zone west of the international waterway, confirmed Kadry.
The project will establish development projects along a 160 km corridor of barren desert beside the canal, including logistics and industrial hubs, at a cost of $220 billion over 15 years, according to the latest official statements.
Last year the government introduced a 5 percent income tax hike to raise the tax rate for individuals and corporations earning more than LE1 million annually to 30 percent for the following 3 years, in an effort to tackle the country's growing budget deficit.
But the improvement in Egypt’s economic situation in the past year convinced policymakers that the temporary tax hike is no longer needed, said Kadry, citing accelerating growth, stock market performance, and falling cost of insuring Egyptian debt against default using credit default swaps.
Part of the reason for the policy shift, according to Kadry, was the realization that within the next ten years, 30 to 40 percent to Egypt’s Gross National Product will be generated in Egypt’s special economic zones.
The government is going to keep tax rates as they are for the next ten years, said Kadry, confirming ealier statements made by other officials.
Egypt is aiming to attract $60 billion in foreign direct investments over the next four years, the country's minister of planning Ashraf El-Araby announced earlier this week.
Egypt will present projects in various sectors worth $40 billion to $50 billion to investors in the economic conference scheduled to take place in Sharm El-Sheikh later this week, added Kadry.