The government is seeking to raise its revenues to more than LE2 trillion annually in the coming period, depending mainly on tax collection. Currently it is eyeing the integration of the informal economy into the formal one and regulating e-trade to bring in more revenue.
The Egyptian Tax Authority (ETA) this week stated that bloggers and YouTubers will pay value-added tax (VAT) if their revenues exceed LE500,000 per year.
It also demanded content-creators, individuals, and companies that use social media to sell their products to register at its offices and open a file to pay income taxes.
Mohsen Al-Gayar, head of the Financiers Services Department at the ETA, explained that the taxes will be calculated starting in January 2021. “The taxes will be calculated based on the revenues stated by the content-creator,” he explained, adding that revenues will be reviewed after five years.
“Everybody should pay their fair share of taxes as long as they are making a profit,” said Erfan Fawzi, head of the ETA.
Bloggers and YouTubers earn money through the ads placed on their videos or pages or by promoting other people’s products.
The ETA is not reinventing the wheel by taxing this group of individuals. Bloggers, influencers, and YouTubers in the US and UK are required to report their income from their activities and pay taxes accordingly.
The ETA decision, Fawzi said, was part of government efforts to integrate the informal sector into the formal economy after the ETA showed that some YouTubers were making hefty sums of money on which they do not pay taxes.
Breaching the tax evasion law is punishable by prison sentences of between three and five years, Al-Gayar pointed out, noting that an e-commerce unit at the ETA has been established to address those in the e-trade business and content-creators on the Internet.
They are currently being invited to join the formal economy.
Yehia Abu Taleb, a professor of public finance, said the ETA was authorised to impose the taxes by decree until it receives parliament’s approval. He added that it would be unfair not to collect these taxes as the government has already imposed taxes on online delivery services nationwide.
This was all the more reason to “collect taxes from YouTubers who have made huge profits in a short period of time and with frivolous content,” he said.
In June this year, the Ministry of Finance decided to levy 14 per cent VAT on companies operating in the Internet economy.
Sayed Sakr, an ETA official, revealed that working with the Ministry of Communications, the ETA has tracked down YouTubers and their profits, adding that it will seek specialists to determine the viewership of uploaded videos and calculate 20 per cent income tax accordingly.
Sakr referred to Law 91/2005 that says that anyone engaging in a commercial activity must open a tax file. Bloggers and YouTubers should make sure they are meeting their legal obligations, he added, saying that revenues are calculated after determining the value of tax for those who practise e-commerce.
He added that the Ministry of Finance wants to collect revenues this year to the tune of around LE1.4 trillion, up from LE1.1 trillion in the previous fiscal year.
Sakr said YouTubers and bloggers must be differentiated from businesses that trade through online webpages. The latter are considered to be small enterprises and their taxes are calculated differently.
In the latter category, profits of LE250,000 will be charged LE1,000 in taxes, and profits between LE250,000 and LE500,000 will be charged LE2,500. Those between LE500,000 and LE1 million will be taxed LE5,000, and between LE1 million and LE2 million they will be charged 0.5 per cent of profits.
YouTuber Hisham Al-Safi, who presents the Do-Gooder Presenter programme, said the ETA decision had two sides. The positive side was that it legalises the status of content-creators, reduces crime, and decreases content that has harmed society. The negative side is that it could impose taxes on people who may be presenting good content but do not garner profits.
The owner of Egypt’s Presenter YouTube channel Abdel-Rahman Al-Safi insisted that all activities that raise income should be taxed, agreeing that the ETA decision will put the brakes on bad content.
“It is difficult to make LE500,000 in profits a year unless you make good content. The decision will limit the number of people who take to YouTube just to make profits. The content online should be monitored,” he said.
*A version of this article appears in print in the 30 September, 2021 edition of Al-Ahram Weekly.