Income Taxes in Egypt: A Detailed Examination of Current Practices

Income taxes are one of the most important sources of revenue for any country, and they have been imposed in Egypt for many years. In this article, we will discuss the challenges facing the tax authority and individuals subject to taxation in achieving the desired tax justice. We will also provide recommendations aimed at improving the tax system and avoiding future problems.

History of Income Taxes in Egypt:

The beginnings of imposing income taxes in Egypt date back to the period of British occupation in the early twentieth century, extending even further back to the times of the Pharaohs, albeit under different names and forms. Since then, the tax system in Egypt has witnessed significant development, with prices and laws being frequently amended to keep pace with economic and social transformations and to achieve the country’s economic and social objectives.

Natural Persons Subject to Taxation:

Income taxation in Egypt encompasses a wide range of individuals, including those who reside or are permanently present in Egypt, as well as those who receive income from salaries or benefits, whether these sources are domestic or foreign. The tax also applies to individuals who earn income from professional, commercial, investment, or any other activities, as long as Egypt is the primary source of activity.

Implementation Challenges and Issues:

The process of implementing income taxes in Egypt faces several challenges, the most prominent of which is the disparity in tax rates and exemptions granted to various segments of the taxpayer community. Individuals may find themselves subject to multiple tax rates during the year, particularly regarding salary taxes, which differ from the final tax rate applied to their other sources of income. This leads to complications and discrepancies in tax values between different types of income realized throughout the year. To address this problem, it is necessary to standardize tax treatment for individuals, applying uniform tax rates to their total income during the year. Additionally, companies should prepare a single Salaries tax reconciliation at the end of the year based on the latest tax rates and exemptions in effect, which would facilitate the collection process and achieve greater tax fairness.

Recommendations:

To solve these problems and achieve the desired tax justice, it is imperative to standardize tax treatment for natural persons and simplify tax procedures. Furthermore, it is advisable to avoid making additional amendments to Article 8 of Law 91, especially if their impact is minimal on taxpayers. The tax authority and taxpayers realized by the end of the year that these amendments did not yield the desired results but rather increased administrative burdens on both the taxpayer and the tax authority. Therefore, the focus should be on improving the current system and effectively enforcing the laws to achieve the intended goal of tax amendments.

Conclusion:

The history of income taxes in Egypt demonstrates significant evolution, but there is an urgent need to improve the implementation process and achieve more transparency and fairness in distributing the tax burden among citizens. The tax decision should take into account the recommendations of the tax community and strive to strike a balance between revenue collection and reducing administrative burdens on both the taxpayer and the tax authority.

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