House gives initial nod to covid-19 salary tax, aims to have it in effect this month

LEGISLATION WATCH- House gives initial nod to covid-19 salary tax, aims to have it in effect this month: The House of Representatives has given a preliminary nod to a law that will require companies to deduct 1% from all employees’ monthly salaries and 0.5% from all pensions during FY2020-2021 to help fund the state’s efforts to contain the economic fallout from covid-19, Al Masry Al Youm reports. Announced in May, the temporary, 12-month tax is being put in place by the government to shore up public finances that have been hit by the pandemic and fund its emergency fiscal measures to prop up the economy, which include a EGP 100 bn stimulus package.

State coffers could take in as much as EGP 8-10 bn from the levy, Finance Minister Mohamed Maait has reportedly said.

All public and private-sector employees will see 1% docked from their salaries as of this month and pensioners will be charged a 0.5% tax on their state pensions. The only people exempt from the charge are those earning a salary or receiving a pension of less than 2k a month or individuals or employees of companies that receive a special dispensation from the cabinet.

Cabinet has wide discretion over the use of the funds, which are to be placed in a special “epidemics and natural disasters” account at the CBE. Funds will be dispensed to support the economy, provide subsidies to impacted workers, offer financial aid to individuals and families specified by the president, develop and maintain the healthcare system, conduct research for preventative and curative care, alongside any other allocations determined by the cabinet.

House approves law to waive late fees on taxes: The House of Representatives has given preliminary approval to a bill that waives interest and late penalties on income, value-added and real estate taxes, according to Al Shorouk. The bill waives 90% of the fees if the taxes are paid within two months after it becomes law, 70% if paid within four months, and 50% within six months. Late taxpayers that were able to clear their dues before the temporary law passed received a 100% exemption, cabinet said in May.

Amendments to the Public Contracts Act also go preliminary approval yesterday as the House approved in principle changes that would allow the government to make payments it owes to contractors through FRA-licensed non-banking financial service providers, alongside the existing option of paying through banks, Al Shorouk also reported. The changes were approved by the cabinet earlier this year.

Background: The Public Contracts Act (previously known as Auctions and Tenders Act) was passed in 2018, and had its executive regulations published late last year. The act outlines the general framework which governs any contract to which a government entity is party. You can find the full text of the 2018 law here.

Also receiving preliminary approval by the House during Sunday’s session:

• A dual taxation agreement with Cyprus that includes income and real estate tax in Egypt and covers income tax for individuals and companies and capital gains tax in Cyprus, the local press reports.
• A draft law to regulate and facilitate access to short-term loans offered by corporations and civil society groups under the supervision of the Financial Regulatory Authority, Al Malreports.
• An ِِEGP 80 bn overdraft for the FY2019-2020 state budget, the local press reports. It wasrequired to pay off dues owed by the Electricity Ministry to the Oil Ministry and the state pension fund.
• An anti-cheating bill that would impose fines and jail time to those found guilty of illegally obtaining and leaking exam materials and automatically fail students caught cheating during exams, according to Al Masry Al Youm.
• A draft law prohibiting army officers from seeking public office without approval from the Supreme Council of the Armed Forces received committee-level approval, Al Shorouk reports.

Final votes on all of the above were postponed due to lack of quorum.

New press and media heads sworn in before the House: The newly appointed head of the Supreme Council for Media Regulation Karam Gabr, and new head of the National Press Authority Abdel Sadeq El Shorbagi were sworn in before Parliament on Sunday, Sada El Balad reports. Hussein Zein, the new head of the National Media Authority was also sworn in, El Watan reports.