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Al-Ahram Weekly 1 - 7 April 1999 Issue No. 423 
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Published in Cairo by AL-AHRAM established in 1875 |
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Al-Ahram Weekly 1 - 7 April 1999 Issue No. 423
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| Published in Cairo by AL-AHRAM established in 1875 |
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Egypt Region International Economy Opinion Culture Focus Interview Profile Features Travel Living Sports People Time Out Chronicles Cartoons Letters Luring the dodgers
by Sherine NasrThe People's Assembly has approved a law aimed at encouraging tax evaders to pay up, just 30 days before the deadline for tax submissions.
The Tax Incentives Law, which was implemented on 5 March, will only be effective until the end of this year. It is an attempt by the government to collect billions of pounds in tax arrears that have accumulated over the past decade.
"Tax arrears have been estimated at LE3 billion pounds," said Fakhri Saadeddin, head of the Tax Authority.
"This initiative will not only regain billions of pounds that have been unpaid, but it is also an effective tool to rebuild trust and respect between tax evaders and the state," said Saadeddin.
According to the law, tax evaders who submit their tax returns between the date the law was implemented and 30 June, will receive a 15 per cent discount on the total sum. Tax returns submitted between July and September will be eligible for a 12 per cent discount, while those handed in after September will receive a 10 per cent discount.
It is large businesses that stand to benefit most from the new ruling. "A million-pound tax bill will be reduced to LE850,000 and the taxpayer will receive a LE150,000 discount," said Saadeddin. The new law also gives taxpayers the option to chose how they would like to enjoy their discount. "A taxpayer can decide whether the 15 per cent discount should be applied on his taxes due, on additional taxes imposed because of delay or on taxes to be charged on future activities," said Saadeddin.
He said the new law does not apply to taxes deducted from salaries or taxes of individuals or companies that are already registered with the Tax Authority.
However, tax experts and professors of accounting have criticised the law. "I am very sceptical about the effectiveness of this law," said Said Abdel-Moneim, professor of accounting at Ain Shams University.
Despite claims by Saadeddin that there has been an increase in the number of tax evaders who have made themselves known to the Authority since the law was approved, Abdel-Moneim argues that the law will not bear fruit. "It is ridiculous to think that people who have never paid any taxes will register with the Authority simply to get a 15 per cent discount," he said. "Even regular taxpayers don't understand why they should pay taxes. They don't do it out of commitment, but because they are compelled to."
Abdel-Monein explained that it was more beneficial for tax evaders to continue avoiding paying tax for as long as they could. "They make use of the money by starting a new project or simply deposit the sum in the bank to receive more interest," he said.
Karim Abdel-Maqsoud, a businessman and taxpayer, said their is little trust between tax payers and the authorities. "Taxes are being estimated haphazardly and most tax payers would evade paying taxes if they could," he said.
Critics of the law further argue that it only offers incentives to people who avoid paying taxes, rather than regular taxpayers. "Those who paid their taxes before 5 March have not been given a discount," said Abdel-Moneim, adding that those who regularly submit their tax returns to the Authority are not given any incentives either.
But Saadeddin argues that the law was specially designed to encourage tax evaders, and that incentives will also be granted to businesses in the tourism sector that have experienced a slump.
Some tax experts argue that the Authority should look for more effective ways to collect unpaid taxes. "One suggestion is to tax professionals a fixed amount since their incomes are difficult to estimate," said Abdel-Moneim, adding that this category would include doctors, engineers, accountants and lawyers.
Another suggestion is to make the penalty of tax evasion tougher. "The penalties as they now stand are hardly compelling to tax evaders," said Abdel-Moneim. He said tax dodgers are fined LE100 to LE500, in addition to 20 per cent of the total taxes each is required to pay.
