The Supreme Investment Council, chaired by President Abdel Fattah al-Sisi, has decided to lift taxes and offer free or discounted land in a bid to attract investors amid economic and political instability.
The decision was made during the council’s first board meeting since its inception in July of this year, which was held on Tuesday. Egypt has been courting international investors since the 2011 revolution drove many away, establishing barriers to economic growth and investment.
After he took office in mid-2014 Sisi launched an economic conference in Sharm el-Sheikh aimed primarily at attracting foreign investors to the energy and oil sectors. However the latest measures taken by the Supreme Investment Council show a government interested in directing investments into Upper Egypt and the industrial and agriculture sectors, which are main contributors to growth in Egypt.
During the meeting the council approved a number of tax exemptions and incentives in an attempt to attract foreign investors. They extended the suspension of the controversial stock exchange tax by three years despite a budgetary need to raise taxes and clamp down on a ballooning budget deficit. This decision was criticized by the International Monetary Fund when first imposed in 2014 as it indicated that the shoring up of public finances would be borne by people who are less able to afford it.
The government has cut subsidies and imposed new taxes in the past years, including a property tax and the recent value added tax, to curb the growing budget deficit. Despite these measures the capital gains tax on stock exchange profits is the only one to be suspended, following objections from investors who threatened to sue the government.
The council also exempted profit gained from agricultural projects from tax if they either provide a substitute for imported crops or plant crops for export.
Agricultural and industrial projects in Upper Egypt are also expected to be exempted from profit tax for the first five years after the land is acquired.
Products produced locally that provide an alternative to imports will also be exempted from profit taxes for five years.
These measures are a means for the government to encourage exports and minimize imports in the midst of the ongoing foreign exchange crisis.
Another incentive agreed upon by the council aims to attract investment to Upper Egypt by offering land for industrial use in the most impoverished part of the country for free. In the new urban communities in the region, land will be offered for only LE500 per square meter and delivered, complete with its infrastructure, one year later.
Investors who pay the council for the state land before the year’s end will get a 35 percent discount on the offered price.
A 25 percent discount was also offered to investors interested in buying land in the new urban communities including the planned administrative capital within three months from the date it is offered.
Seeking to integrate small and medium enterprises into the formal economy, the investment council is offering them tax reconciliation to register with the tax authority by paying a segmental amount on every year in their activity until 2017.
The council also approved the creation of a new marketing company under the General Authority for Investments to promote domestic and foreign investments. A new permanent dispute committee will also be established to look into investors’ complaints and report them to the investment council. All ministries will be obligated to implement the existing dispute council’s decisions within 15 days.
Additionally, a new national council will be created with the aim of reducing the use of cash outside the banking system.