How to tax illegal tutors?

Nahla Abul-Ezz, Tuesday 7 Dec 2021

The Egyptian Tax Authority’s decision to tax private tutoring centres has raised controversy among observers,

The Ministry of Education is clamping down on illegal tutoring centres
The Ministry of Education is clamping down on illegal tutoring centres

In a move aimed at increasing tax revenues, the Egyptian Tax Authority (ETA) has decided to impose taxes on the activities of private tutoring centres in Egypt, giving them one month to open accounts with the ETA.

However, the decision has raised controversy among teachers and tax experts because many such centres, which the Ministry of Education has been trying to close since 2018, are not licensed, making it difficult to see how they can be legally subject to taxes.

Since the centres are already not legal, how can their activities be taxed?

Director of the technical office of the ETA Said Fouad said that companies making profits should pay taxes on them, pointing to the profitability of some centres offering private lessons.

He said the ETA was not authorised to grant licences to the centres or other entities and that it was up to the Ministry of Education to legalise private-tutoring centres. The goal of the ETA was to collect taxes and to promote tax justice, Fouad said.

Private tutoring has grown in recent years owing to the deterioration of the quality of education in many schools, especially in the public sector. The cost of private lessons has become a burden on many Egyptian households, with a report cited by the Egyptian Centre for Economic Studies (ECES), a think tank, saying that household expenditures on tutoring at the preparatory, primary, and secondary levels accounted for 1.6 per cent of Egypt’s GDP.

Since 2018, Minister of Education Tarek Shawki has been cracking down on private-tutoring centres, instructing the ministry to raid them. Some statistics put the number of centres that the Ministry of Education has closed since December 2020 at more than 95,000 nationwide.

Fouad said that obliging the centres to pay tax on their activities did not mean acknowledging their legal status. Any profit-making entity should legalise itself and pay due taxes on its revenues, he added.

According to amendments to the articles on small and micro-sized enterprises in Egypt’s tax laws, companies with capital of LE500,000 should pay LE2,500 annually in taxes and companies with capital of LE250,000 should pay LE1,000.

“Teachers working at the centres should pay tax on their revenues like any other profession. Teachers who give private lessons at home could also be guilty of tax-evasion since they are working in the informal economy,” Fouad said.

“The decision to tax private-tutoring centres is not intended to encourage their activities. It is the state practising its right to collect taxes on the profits they make,” said Magda Nasr, a former member of the Education Committee of the House of Representatives, the lower house of Egypt’s parliament.

“I am all for imposing taxes, but that doesn’t mean I approve of private tutoring or of regularising its status,” she said.

Amr Al-Monayer, a former deputy of the minister of finance and an expert on international taxation, said it was non-negotiable that whoever makes profits has to pay taxes, though this did not solve the question of the mechanism by which they should do so.

It would make little sense to ask those involved in illegal activities to register with the tax authorities and pay taxes, since their activities were already outside the law, he said. Should such people be caught, their assets would be confiscated and appropriate taxes calculated.

Something similar was true for private tutoring, he said. Private tutorial centres should not be invited to register with the ETA because their activities were already illegal and collecting taxes from them was not in line with their illegal status.

Al-Monayer said that the move to impose taxes on the centres resembled the ETA’s decision a few months ago to tax YouTubers and online content creators, describing the decision as a “shot from an unprofessional shooter”.

How many content creators had applied to register with the ETA, he asked, adding that there was no tangible data on the subject because there were no clear mechanisms on how to impose such taxes.

*A version of this article appears in print in the 9 December, 2021 edition of Al-Ahram Weekly.

Short link: