Income tax changes reduce tax burden for most without increased taxes on the rich

The Planning and Budget Committee in Parliament on Monday approved changes proposed by parliamentarian Mervat Alexan to income tax brackets. The amendments to the income tax law are expected to be sent to the House floor for approval.

The following table compares current income tax brackets to the proposed changes:

Current income tax brackets (annual income)Proposed new income tax brackets (annual income)Tax rate
Less than LE 8,000 per yearLess than LE14,000 per yearExempt
Between LE8,000 and LE30,000 per yearBetween LE14,000 and LE40,000 per year10%
Between LE30,000 and LE45,000 per yearBetween LE40,000 and LE60,000 per year15%
Between LE45,000 and LE200,000 per yearBetween LE60,000 and LE200,000 per year20%
More than LE200,000 per yearMore than LE200,000 per year22.5%
Source: Law 97/2018 that amended some provisions of Law 91/2005

 

Alexan previously told Mada Masr that she introduced the changes in an attempt to mitigate the effects of inflation since the current tax brackets were set in mid-2018.

The bill almost doubles the income tax exemption threshold from LE8,000 to LE14,000 and reduces income taxes for most classes. Yet it does so without raising taxes on the highest income brackets to finance the reductions, which could translate into lower tax revenues.

Hani al-Husseini, a prominent researcher focusing on issues of tax justice and a member of the Egyptian Association For Public Finance & Taxes, says the increase of the tax exemption threshold and easing of tax burdens on some income brackets could be funded by simply raising taxes on higher earners.

“It’s true that the current maximum tax rate is attractive to investors and corporations,” Husseini told Mada Masr. “But it could be raised to 30 percent, for example, in exchange for a package of tax incentives, such as reduced taxes for corporations employing a minimum number of workers and other conditions related to development.”

“Reducing the tax burden on the lower classes is understandable as a social matter,” he added. “But it is also understandable that this is done in parallel with raising taxes on the upper classes in order to finance it.”

The maximum tax rate was raised from 20 percent to 25 percent in 2011 following the January 25 revolution. But in 2015, the government introduced amendments that reduced the maximum income tax rate from 25 percent to 22.5 percent and abolished a wealth tax of an additional 5 percent for those whose annual income exceeds one million pounds. The wealth tax was initially introduced in 2013 for a period of three years. 

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