Changes to the tax code are coming, whether in the form of a new law or amendments. The Ismail government is considering the introduction of an earned income tax credit to replace the current list of exemptions. Other changes will include harmonizing the code with the incentives outlined in the Investment Act now being considered by the House of Representatives, said Deputy Finance Minister Amr El Monayer.

The mere notion of amendments to the tax code has touched off a wave of complaining: Unnamed sources in government tell Al Mal that changes to the tax code will take the form of amendments to the existing body of law, and that appears to have incensed the newspaper, which says this would mark the seventeenth time the tax code has been amended since coming into force in 2005 — and despite a promise at EEDC in March 2015 that policy stability would be the order of the day. Meanwhile, PwC partner Abdullah El Adly says the number of amendments to the code is worrying and suggests that the move hints at instability in the government’s tax policy and will be interpreted as such by investors. The head of taxation at the Federation of Egyptian Industries stressed that the upcoming changes should come with a clear statement that tax policy will remain stable in the long term — a big ask for a government rumored facing a cabinet shuffle before month’s end, let alone a nation in the midst of an IMF-backed reform program.

The devil is in the details, but the introduction of an earned income tax credit could be a positive development. We understand concerns about policy stability, but as we see it, policy stability simply means “do not make the process of paying taxes more tedious, do not radically change your philosophy of taxation, and above all else do not increase rates.” The notion that investment incentives — widely supported in the business community — could be introduced without tweaks to the tax code is simply ludicrous. As for the preoccupation with whether it’s best to introduce amendments to the existing code or a new tax code in total as suggested by Finance Minister Amr El Garhy last month? Have a look at the US code and its mess of loopholes and exemptions — there’s nothing wrong with a new code.

Focusing on the mechanics of whether tax codes change through piecemeal amendments or full overhauls is exactly backward — it’s a focus on process at the expense of what really matters: Policy.

This comes as Investment Minister Dalia Khorshid has approved an amendment to how FX losses are treated for tax purposes under Egyptian Accounting Standards, Al Mal reported. The amendment adds an additional option to the standards that allows companies to recognize changes in valuations that preceded the EGP float in November 2016. Egyptian Financial Supervisory Authority (EFSA) head Sherif Samy told the newspaper that the amendment will only be applied this fiscal year, and is not mandatory. In addition to laying out procedures for factoring in FX losses or gains on the income statement, the amended standards will also outline how USD debt will be translated, he added. The amendments will not affect how much companies will ultimately pay in taxes, but will distribute the FX changes over multiple periods, said PwC’s El Adly. Page 1 of the amendment is here and page 2 is here.

The EGX has approved the listing of Banque du Caire’s shares on the EGX, the bourse said in a statement. As a prelude to an initial public offering, Banque du Caire will list 562.5 mn shares at par value of EGP 4 per share, giving it an initial market capitalization of EGP 2.25 bn. The bank has six months to complete its paperwork for listing and is required to issue a minimum of 10% of its shares within the same timeframe, an unnamed official tells Al Masry Al Youm. We had also covered previous reports that the government was considering increasing the percentage of Banque du Caire shares set to be listed to 30% from an initial plan of 20% by issuing 10% of the bank’s shares as GDRs on the London Stock Exchange to “attract foreign investors.”

CI Capital sale to wrap soon? The Egyptian Financial Supervisory Authority (EFSA) should finish going over the details of CIB’s sale of 70-80% of its investment banking arm CI Capital “soon,” sources close to the matter tell Al Borsa, which puts the total transaction value at c. EGP 950 mn. CI Capital might be looking at an IPO toward the end of 2017 as part of CIB’s agreement with the acquiring consortium, which is reportedly made up of Zahran Group, Arafa Group’s Alaa Arafa, Compass Capital’s Abbas and financial services veteran Shamel Aboulfadl, and Salam International Hospital’s Fahad Khater, among others. A number of these backers have reportedly received their security clearance, while other regional investors are still waiting. Zaki Hashem & Partners are advising CIB on the transaction.

Major Chinese contractor pulls out of New Administrative Capital project. China State Construction Engineering Company’s decision to pull out of a USD 3 bn deal to build government facilities at the New Capital is the “latest snag” the mega project is facing, Eric Knecht writes for Reuters. Knecht notes that Egyptian contractors, who offered lower prices than the Chinese company, will take over the job. Meanwhile, a USD 20 bn memorandum of understanding for construction projects in the New Capital was expected to be signed with China Fortune Land Development Company (CFLD) in December, but that has been pushed back and will likely be signed within six months.

Alex Port does another round of summersault, cartwheel, backflip on multipurpose platform: The Alexandria Port Authority has returned to talks with China Harbor on the never-ending saga of the USD 750 mn multiplatform facility in the port. The authority has already twice ended and resumed talks on the project since it was first announced at the Egyptian Economic Development Conference in 2015. Talks resumed at the direction of the Ismail cabinet, said Port Authority chief Medhat Attia, according to Youm7. Alex Port had announced for the second time that it will end talks on the facility back in September.

AMIC breaks down sales performance of the auto industry in 2016 by company and model: Thirteen auto companies reported 15-80% year-on-year drops in sales volumes in 2016, according to data from industry group the Automotive Information Council picked up by Al Mal. (Just to be clear: The story focuses on volumes — the number of cars each distributor moved — not sales revenues, as self-reported to AMIC.) EGX staple GB Auto was one of the lucky few, reporting a sales dip in volume terms of just 0.1% in the year as it went on to accumulate a record market share. Skoda distributor ARTOC Auto posted the largest decline in volumes with a 79% y-o-y drop in 2016 on the back of an ongoing legal dispute between the distributor and the brand after Skoda unilaterally canceled a distribution agreement. Auto Jameel saw unit sales of Daihatsu cars fall 45.6% while Mansour Group reported a 32.5% dip in sales of Chevrolet 32.5% and 25.3% for Opel.

Smaller players are among those who posted gains, with bit player Subaru reporting the strongest sales growth in percentage terms at 92%. Lada and BYD distributors Al Amal came in second with a 56% jump in unit sales, followed by Fiat Chrysler Automobiles at 41%. MCV distributed brands scored sales growth of 12%, while Volkswagen and Audi distributor Egyptian Automotive saw unit sales of its models rise 10%.

EMRA chief’s response to critics of gold tender: We’ll see on 20 April. Egyptian Mineral Resources Authority (EMRA) chief Omar Taima hit back at mounting criticism of EMRA’s terms for gold exploration concessions, saying companies that participate in the bid round will be exempt from customs, income taxes and corporate social responsibility obligations. Speaking at a gathering yesterday, he added that the concessions will be for 38 years, as opposed to 15 years (which he said is the standard globally), adding that the concessions on offer have proven gold deposits. He dismissed claims, including by Thani Stratex Resources CEO David Hall, that production sharing agreements can only work for oil investors, saying that the risks in mining are higher as the concession areas are smaller than those of oil. He told critics that the terms will be vindicated when offers come in on 20 April.

Taima called out Thani and Aton Resources by name, saying they accepted old terms that were less attractive than those in the new bid round, Youm7reports. We had previously noted the objections raised by the CEOs of both companies. He made sure to let these companies know that the terms have the approval and support of the government.

Tamer Abu Bakr, head of the oil division at the Federation of Egyptian Industries appears to be backing Taima up, telling listeners at the workshop that there are plenty of interested investors in the gold exploration tender, the newspaper reports. He called on investors to show their support to EMRA and participate in the tender, the way international oil companies did with the petroleum sector. Sounds like a perfectly logical way to make a business decision.

SODIC to bump capital for employee incentive program: SODIC is looking to increase its issued and paid-in capital by EGP 13.56 mn to EGP 1.37 bn to finance its employee incentive and bonus schemes, Al Borsa reported. The Egyptian Exchange is currently processing SODIC’s request for the hike, which will be financed through company reserves.

The European Bank for Reconstruction and Development (EBRD) has its first country strategy (pdf) for Egypt after the document was approved by the bank’s board on Wednesday. The EBRD’s cooperation strategy will focus on four priorities. The bank plans to spur private sector growth through SME financing with a focus on women and youth projects. The EBRD will also be looking to help improve Egypt’s energy infrastructure through the promotion of gas market reforms and financing the modernization of municipal infrastructure with the participation of the private sector. The bank will also look to financing renewable energy projects and energy efficiency investments, including energy efficiency credit lines for SMEs, in addition to water efficiency through modernising water supply and wastewater management. The EBRD will contribute to improving governance in the public and private sector with the aim of improving competition, promoting investment and policy delivery.

On a related note, the EBRD is extending the Water Holding Company a EUR 113-120 mn finance facility to fund a project to clean and purify Lake Qarun in Fayoum, an official from the bank tells Al Mal. The total cost of the project is estimated at EUR 550 mn, in which the European Investment Bank is also participating, with additional funding coming through an EU grant, he added. The Water Holding Company is also negotiating with international lenders, including the African Development Bank, for a USD 100-150 mn loan to finance infrastructure projects in Upper Egypt, deputy Chairman Ahmed Moawad told Al Mal.

Prime Minister Sherif Ismail sanctioned a presidential decision to establish a tripartite free trade area between countries of the Common Market for Eastern and Southern Africa (COMESA), the East African Community (EAC), and the Southern African Development Community (SADC), during the cabinet’s weekly meeting on Wednesday, a statement said. The cabinet also approved a law proposal that aims to place organic farming under the Agriculture Ministry’s supervision to ensure their compliance with international benchmarks and local regulations. Additionally, the ministers also signed off on a judicial and legal cooperation agreement that Egypt had signed with Kuwait early in January.

A plan to connect the electricity grids of Egypt, Greece, and Cyprus could be underway, The Associated Press reported. “An official says studies are underway for an undersea electric cable that aims to link the electricity grids of Egypt, Cyprus and Greece with the rest of Europe.” The “EuroAfrica Interconnector project” would include a 1,650 km long cable that has a 2,000 MW capacity to transmit and receive electricity. The project is set to be implemented over 36 months and Egypt signed an agreement to proceed with the studies.

“Several” rockets were fired from Egypt toward the southern Israeli city of Eilat but were intercepted by the Iron Dome defense system with no injuries reported, the Associated Press reports. While the AP says that it was not immediately clear who was behind the firing of the rockets, the Jerusalem Post points the finger of blame to “terrorists in Sinai.”

UK’s House of Commons greenlights Brexit bill: The majority in the UK’s House of Commons voted favor of a legislation that would give Prime Minister Theresa May the green light to officially launch her Brexit strategy on Wednesday, CNN reports. The House of Lords is expected to say their last word on the bill in a vote later this month, but they had previously voted “overwhelmingly in favor” of it earlier in February.