Another raft of tax changes are back on the legislative agenda: Tax changes that would reduce income tax for lower earners and raise tax for those on the higher incomes received approval from the House Planning and Budget Committee on Thursday. Draft amendments to the income tax law would raise the personal income tax exemption threshold to EGP 36k from EGP 24k while introducing a new 27.5% higher rate of tax for people earning more than EGP 1 mn a year.

That’s a higher band than we’d been expecting: We’d previously been told by a source at the Finance Ministry that the new top tax band would affect earnings above EGP 800k. The current top rate of tax is currently 25% and is applied on annual incomes over EGP 400k.

REFRESHER- President Abdel Fattah El Sisi directed the government to raise the income tax exemption threshold back in March, with our FinMin source at the time telling us the new top tax rate would be brought in in tandem. See our initial story for more detail on how income tax works and how the changes are expected to impact each tax band.

Top earners will cover some of the tax breaks for lower earners: Raising the income tax threshold will cost the state treasury some EGP 10 bn — EGP 4 bn of which will be offset by the revenues generated from the new top rate, Deputy Finance Minister Ramy Youssef told MPs.

THERE’S MORE-

The amendments include measures to simplify tax procedures and combat tax evasion, Finance Minister Mohamed Maait said in a statement Friday:

#1- All small businesses considered SMEs for tax purposes: Any business with annual revenues of less than EGP 10 mn will be eligible for the preferential, flat-rate tax treatment that was brought in for SMEs under a 2020 law.

#2- Incentives for individual e-invoicers: Individuals who are obliged to file under the new e-invoicing system will get an incentive worth 5% of their annual tax bill. Remember: Self-employed people only need to register for e-invoicing if they work with entities that are required to file e-invoices — as opposed to with end consumers — after blowback from professionals including doctors, lawyers, and pharmacists.

#3- Whistleblowers’ reward: Citizens who help the ministry detect cases of tax evasion will receive up to 10% of the penalty paid by the culprits.

This was the second package of tax changes to be approved by the committee last week:Legislation that would make a number of changes to existing taxes and duties — including introducing a new entertainment tax, imposing fees on duty-free products, raising duties on imported luxury goods, and doubling departure the fee charged on flight tickets — was approved by the committee on Wednesday.

Departure fee hike only applies to locals: The proposal to double the existing EGP 50 departure fee only applies to locals and not foreign tourists, Maait clarified in the statement.

What’s next? The amendments will be discussed and voted on by the House General Assembly in an upcoming session. MPs are reconvening today.

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