The deadline for submitting real estate tax reports has been pushed back three months, but this has not stopped the talk, writes Niveen Wahish The past two weeks have been hard on real estate tax offices. Citizens queued and crammed to get application forms and fill them out before the end of December -- the original deadline set for submitting tax reports. "They were standing in the hallway, on the staircase and in the street filling out their forms," said one real estate tax employee. But on Sunday, Minister of Finance Youssef Boutros Ghali announced that citizens have until 31 March 2010 to hand in their reports. "When they learnt of the postponement they relaxed and decided to fill the applications at home and come back later to hand them in," said the same employee. However, she feels that in March a repeat scenario will unfold as the new deadline approaches. "People had four months since the executive charter of the law was issued to come forward with their tax reports, yet they waited until the last minute." The Ministry of Finance had tried to facilitate the process by extending real estate tax office hours, making the application form available for free download online, and accepting applications by mail. Yet the crowding continued. And although the tax reports were free of charge, they were being sold on the black market for up to LE20 each. Had the deadline not been extended, an estimated 25 million plus citizens would not have had the time to file their reports. Some 10 days before the deadline, reports for only three million units had been presented out of an estimated 30 million taxable units. Everyone who owns a real estate unit, whether a villa, a kiosk or a floating home is required to file a real estate tax report. Units below LE500,000 in value are tax exempt. But even owners who think that they are exempt are required to file reports. Ghali said that tax reports would also serve the purpose of feeding the database on real estate in Egypt and will be used to upgrade the country's infrastructure in terms of services such as drainage and roads. Anyone liable who does not file a report will be subject to a fine ranging from LE200 to LE2,000. Ideally, the postponement of the deadline of filing will mean more citizens coming forward with reports, thus narrowing down the number of individuals whom the government will have to chase with fines. Although it would appear that public pressure has been instrumental in postponing the deadline, experts believe the postponement was needed by the Ministry of Finance as well. Ahmed El-Zeiny, head of the Building Materials Division at the Cairo Chamber of Commerce, believes the ministry needed time to organise itself to be able to deal with the huge amount of incoming reports. Hassan Hegazi, chairman of the Customs and Taxation Committee at the American Chamber of Commerce in Cairo agrees. He added that it would have been impossible for the ministry to take millions to court. "That could cause a revolution," he said, adding: "Practically speaking, the courts cannot take on so many claims. They are already overloaded." The extension of the deadline would not only allow more citizens to present their reports, but will also keep debate over the new tax as fierce as ever. One of the points of contention over the new tax is that it does not exempt the first home. "Housing is one of the basic needs; how can one's home not be exempt?" questioned dentist Ahmed El-Husseini. Not only that. Amal Fouad, 70, lives in an apartment that her husband bought 25 years ago for LE100,000. Today it is valued at LE800,000, which means she must pay taxes for it. Yet she does not have the income to afford the tax. "Should I leave my lifelong home because of the tax?" she questioned. She acknowledged that the Ministry of Finance has allowed citizens in a similar situation to present an appeal requesting that they be exempt, but that also means wading through endless bureaucracy. While real estate tax is something that is applied in 180 countries, Hegazi said the first home is often exempt. He believes that the Ministry of Finance fears that people will find loopholes to get around the law. The valuation of units is another issue feared by citizens. Again Fouad is among those. "If I were to buy my own home today, I would not afford it. They should look at the value when I bought it." But the Ministry of Finance will look at current market value. Others worry that though their units today may be exempt, when a revaluation takes place in five years they might not. However, the ministry has argued that just as the value of the units will increase, so will the income owners. It adds that the law stipulates that the new valuation should not exceed 35 per cent of the first valuation. Other complaints have come from businesses in the banking and tourism sector who are not yet clear on how the law will apply to land or buildings they own. But despite the debate, the real estate industry is not expected to be negatively affected. El-Zeiny is of the opinion that real estate will continue to be the safest investment for Egyptians, particularly with a global economic crisis and the fluctuating stock market. And, he adds, it is also better than bank deposits, which at today's rates will earn only six per cent in profit. "Time has shown that real estate increases in value by at least 10 per cent." Hegazi agrees. He says that even at the peak of the global crisis in early 2009, prices did not drop, they stabilised. "Egyptians view real estate as a value keeper." This is supplemented by the fact that most Egyptians pay for their apartments in cash and do not depend on a mortgage or bank loans. He does not think that individuals who have invested in a number of apartments will dump them just to avoid the tax, but they could re- evaluate their investments, dropping the ones they think are worthless. However, he said that there might be a drop in new buyers at the beginning of the application of the tax, but once the tax is a fact of life, things will go back to normal. Some believe the extension of the deadline is a good indicator that the new tax may be reconsidered. Hegazi thinks it is only a temporary delay. But those who argue that the tax is unconstitutional, based on the fact that in some instances it may lead to double taxation, might use the time to go to court against the government. If this were to happen, El-Husseini says he will join them. "I am not against paying taxes, but I want to see something in return for these taxes. I want a better educational system, better health coverage and cleaner streets."
