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Taxation and Economic Growth: A New Framework for Egypt

Taxes are a vital tool in managing the economic affairs of any country, serving as a significant source of funding for governmental projects and stimulating economic growth. Egypt has witnessed the imposition of taxes throughout history, starting from ancient times during the Pharaonic era up to the present day. This experience raises important questions about the role of taxes in the development of the Egyptian state: were they an effective means for its economic advancement, or were they an obstacle to economic and social progress?

Historically, tax revenues were concentrated in the hands of the ruler and the ruling elite, used to finance infrastructure projects and enable the government to achieve economic and social stability. However, in modern times, Egypt has seen an increase in the size and spread of taxes on individuals and companies, raising questions about the effectiveness of these tax policies.

Taxation in Egypt is an essential part of the government’s strategy to achieve sustainable development. While it generates income for the government to finance public services and development projects, taxes can also be a barrier to economic growth and social balance, especially when there is tax evasion and inefficiency in tax collection.

The main challenge facing Egypt is how to balance tax revenue collection with promoting economic growth and achieving sustainable development. Tax policies should be aimed at enhancing investment and encouraging innovation, making taxes a stimulus for economic growth rather than a hindrance.

Tax policies in Egypt should be part of a broader framework to promote a safe and sustainable investment climate. These policies should strike a balance between tax revenue collection, investment promotion, and job creation, with special attention to enhancing transparency and good governance in tax administration.

Some friendly Arab countries have begun to follow this approach, implementing tax policies that focus on encouraging investment and promoting economic growth, rather than solely focusing on revenue collection. These countries have shown positive results, attracting larger investments and improving the investment environment.

Therefore, Egypt and other Arab countries should learn from these experiences and consider updating their tax policies to be more effective in promoting investment and stimulating economic growth. Taxes should be viewed as an economic stimulus tool aimed at supporting economic activities and enhancing competitiveness, rather than just a means of revenue collection. Through this approach, taxes can contribute to creating a favorable investment environment, promoting economic growth, and achieving sustainable development in Arab countries.

In conclusion, taxation in Egypt is an essential part of sustainable development strategy. By improving the investment climate, enhancing transparency, and accountability in tax collection, Egypt can achieve a balance between revenue generation and economic growth, contributing to a promising future for future generations.

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Written By

Hamdy Yahia - Tax Partner

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