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Al-Ahram Weekly 1 - 7 July 1999 Issue No. 436 
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Published in Cairo by AL-AHRAM established in 1875 |
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Al-Ahram Weekly 1 - 7 July 1999 Issue No. 436
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| Published in Cairo by AL-AHRAM established in 1875 |
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Egypt Region International Economy Opinion Culture Profile Features Special Interview Travel Living Sports Time Out Chronicles People Cartoons Letters Tax-free exports?
By Sherine NasrMembers of the Egyptian Exporters Division -- a section of the Federation of Egyptian Chambers of Commerce -- met last week to build a legal case for their demand that all exporting activities be exempted from taxation. This came a week before their meeting with Mohieddin El-Gharieb, minister of finance, who asked members of the Division to specify their complaints and demands in clear-cut terms.
"Our major demand is to enjoy tax-free exporting activity and we intend to fight until this demand is fulfilled," said Abdu Badawi, a board member of the Division. Unless businessmen's associations, investors in the new industrial zones and the chambers of commerce lobby for the same result, little will be done by the government, Badawi added.
This united stance on the part of the Division is not unexpected. It appears to be a natural reaction to strong criticism from El-Gharieb in his meeting with exporters last month. He went so far as to describe some of them as tax evaders and smugglers.
"This aggressive attitude on the part of the ministry against exporters is contrary to the government's attempts to encourage Egyptian exports," said Badawi. If the state is really serious about increasing exports, there is no other way but to adopt a tax-free export policy, he said.
During his meeting with exporters, El-Gharieb argued that those who want to be exempted from taxes should move their activities to tax-free zones or the new industrial cities. "This means that I have to relocate my factory and my company, which is next to impossible," retorted Abdel-Meguid Rostom. Exporters in different governorates should enjoy the same preferential treatment granted to investors in the new industrial cities, he added.
Although some exporters admitted that a minority can cause great harm to exporters generally by their wrongdoing, they insisted that government officials are not totally blameless. "There is no corrupt exporter without a corresponding corrupt government official," said Aref El-Fakhori, owner of a textile company who is an exporter. The total amount of taxes imposed on exporters is estimated at LE30 million a year, according to Samir Mustafa, a member of the Division. "This is not a big deal. If the government exempts exports from taxes, it will not constitute a big burden on its budget," he noted.
Surprisingly, the law does not differentiate between manufacturing and exporting as two separate activities. "This causes many problems for exporters with tax collectors. Although some practice both activities, not every exporter is necessarily an industrialist," said Helal Sheta, deputy chairman of the Division.
The law concerned with the tax exemption of exporters stipulates that the first LE8,000 net profit from any deal is taxed. The rest is treated as follows: 70 per cent of the remaining amount is taxed and 30 per cent is tax-free. "This law does not encourage small exporters with a net profit of less than LE10,000 because only bigger deals enjoy a 30 per cent tax exemption," said Sheta.
Exporters were also very critical of the fact that not all of them are treated the same way by the tax collectors. "Different governorates, and even different banks, adopt different policies regarding tax collection. This should not be the case in the same country," said Abdel-Fattah Shahin, an exporter from Port Said. "Normally, one per cent of the total value of the deal is automatically deducted from the exporter's bank account for taxes," said Sheta. However, this is not necessarily the case with all exporters, he explained. "This was never the case with me although I have been in this business for years, and I deal with different banks," Shahin added. Some exporters objected to the idea of calling for a 100 per cent tax-free export activity, describing the demand as unrealistic and far-fetched. But Badawi insisted, "This is the right time to ask for it." He noted that all ministries have clear political orders to encourage exports. "It is a question of bargaining with the government, and we have to make the best out of it," said Sheta.
