The Egyptian government intends to submit a draft law to the House of Representatives, which stipulates the abolition of the capital profit tax after a year of its implementation following unprecedented losses in the stocks, after difficulties and obstacles in its application, the lack of issuance of its executive regulations, and great losses in the values and movement of the stock exchange.
A government official said that the Council of Ministers is preparing to submit a draft law to the House of Representatives during the current parliamentary session to discuss and ratify it, and stipulates the abolition of capital profits tax on the stock exchange transactions, while returning to imposing a severed “stamp tax”.
This comes within a government plan to stimulate the money market, which includes simplifying tax accounting procedures for customers on the stock exchange, to increase the competitiveness of the Egyptian money market in the region.
The Egyptian government aims to develop the performance of the stock market, as part of a plan to improve the investment climate, and the plan to develop the money market includes the offering of 10 companies, including 4 owners of the Egyptian army with the aim of attracting more investments to the money market, and at the same time implementing the state’s royal policy document by increasing the contribution of private sector participation in the national economy.
The International Monetary Fund had demanded more than once to reduce the role of the Egyptian army in the economic sectors within the economic reform program to lend Egypt, and the National Service Projects Agency of the Army has dozens of companies in various economic sectors, including:
- Al -Nasr Services and Maintenance Company (Queen Service).
- Quinn Marsa Company.
- Egg production complex.
- The National Food Industries Company.
- Safi water company.
- Egypt Upper Egypt Agricultural Manufacturing and Land Reclamation Company.
- The National Company for Refreshments and Supplies.
- National Petroleum Company.
- The National Fish Resources and Water Distribution Company.
- Al -Arish Cement Company.
- The Arab World Optical Company.
- Plastic plastic production factory.
- The National Championship Company.
- National Company for General Contracting and Supplies.
- The National Company for Road Development, Development and Management.
Following and conflicts
In recent years, the Egyptian Stock Exchange has witnessed fluctuations regarding the imposition of taxes on transactions, between the stamp tax on the sales and purchases, and another that is collected on the annual cash profits achieved from trading, and the latter has not been applied yet, due to the failure to issue the executive regulations of the law of issuance as a result of the lack of a clear collection mechanism, amid fears that its application will lead to severe losses in the market.
The Egyptian government canceled the stamp tax on the stock exchange transactions in 2014, and instead approved the capital profit tax by 10% on the cash distributions, and a year later it postponed the application of the tax for two years due to the losses incurred by the money market, and the postponement continued for 10 consecutive years and with the end of the postponement period, the stock market ended with new losses, which prompted the government in May 2024 to postpone its application again.
Government sources revealed in statements that the stamp tax will not be returned in the same previous system, but rather adjustments will be made to ensure the achievement of justice between customers of the money market, adding that the tax price will be in the range of 1 per thousand on the seller only, but the tax price has not yet been settled, but he confirmed that the price will be competitive and will ensure the achievement of justice for all dealers.
The sources emphasized that the aim of canceling the capital profit tax is to encourage investors to invest in the stock exchange and enhance its role as a platform for financing, and this decision helps positively to perform the money market during the coming period, and these sources expected that the legislative amendments will be approved by the government, and referred to parliament during the current parliamentary session.
The absence of the regulations and the duplication of tax
The economic expert specializing in the affairs of the Egyptian Stock Exchange, Amr Abdullah, told Al -Jazeera Net that the government was unable to implement the capital profit tax and organize it for several factors, including the lack of an executive regulation for the law as well as the difficulty of its account for every customer or investor on the stock exchange because the tax collection authority needs in this case from Egypt Clearing Company the balances of the investor at the beginning of the year and in the middle of the year and at the end of the year and this is difficult to limit it because it needs many mathematical methods that may be unable Micro -accounting standards.
Abdullah added in an interview with Al -Jazeera Net, “One of the negatives of capital profit tax is that it hinders investment opportunities and disrupts free market mechanisms, which makes a segment of investors playing the market and therefore there is no pumping of new investments and liquidity on the stock exchange, and this applies more to individual investors, whether they are Egyptians or foreigners, not institutions.
He adds, “Many legal and tax accountants believe that the capital profit tax law contains double in the profit account, which is a defect in the law that hinders the application of the tax.”
He points out that when the capital profit tax law was issued, the stamp tax was collected on transactions on the stock exchange, a tax that the state would benefit from, whether in the case of purchase or sale, as well as in the case of gain or loss, which reduced the tax revenue that comes to the state from the stock market, especially after stopping the collection of the capital profit tax after one year of its application, while the stamp tax was a simple and clear tax and the investors come back to.
On the expected impact of the cancellation of capital profit tax, the Egyptian Stock Exchange expert says that its positive impact on the trading movement will be for several sessions in the short term and the market then returns to the normal path and not a continuous effect in the long term, explaining that the cancellation of the capital profit tax may be the aim of it is the success of the proposals of the upcoming and upcoming government companies and subscribed to it.
“But we want to activate a quick activation program by the managers of promotion of professionals and companies with experience and precedent of distinguished business in promoting and managing the proposals,” he said.
Trading values and investor pressures
The Egyptian Stock Exchange expert Hanan Ramses spoke to Al -Jazeera Net, “The Egyptian government is to cancel the capital of capital profits and the issuance of an upcoming law that leads to the activity of trading movement and attracting investments and pumping new liquidity into the stock exchange, because in the past the government’s talk about its imposition led to a decline in the movement of trading and lack of liquidity, while any successful securities market constantly needs to expand the base of investors and include new dealers and financial investments Trading movement is activated.
On the reasons that called on the government to cancel the capital profit tax, Ramses says: “The Egyptian Stock Exchange has witnessed a decrease in trading values with a complaint and pressure from investors to cancel it, and among the reasons and motives of the state as well is its keenness to make the new proposals program successful on the stock exchange, and therefore it was necessary to cooperate with investors and respond to their desire to cancel the tax.”
“The application of capital profit tax has faced difficulties, including the refusal of dealers on the stock exchange, especially small investors, to have files in the Egypt Clearing Company that oversees investor accounts on the stock exchange, stressing that canceling the tax reinforces the state’s efforts that try to attract investments in all economic sectors.”
Notorious
The Board of Directors of the Stock Exchange, Rania Yaqoub, described in televised statements of capital profit tax as “reputable”, justifying the reason for the name that since the approval of this tax in 2014 it caused severe losses to the stock exchange, and the reluctance of investors, and said, “In contrast, the financial markets in the surrounding countries give competitive advantages to foreign institutions and funds to invest in active proposals programs, and the Egyptian Stock Exchange (Confronting) a challenge to a decrease in the lack of supply from companies as a result of the delay in the implementation of the government proposals program.
