Finance Minister Hany Kadry Dimian said the government has cancelled the "discount and added" tax, ranging from 3% to 5%, currently enforced in 24 sectors including food industries and medicine. Dimian said the move, which he expects to be approved by outgoing President Adly Mansour, will provide excess liquidity to traders and contribute to facilitating their commercial dealings. "Proceeds from the wealth and stock market tax are expected to be EGP 10bn, EGP 3.5bn to EGP 4bn of which from dividends and EGP 2bn from capital gains which, in addition to tax planning, is expected to save additional billions," Dimian said. "The estimated wealth tax of 5% on income over EGP 1mn annually will provide EGP 3.5bn." Dimian added that exemptions on bonus shares for listed companies will attract unlisted companies to enter on the stock market, taking advantage of the exemption. Floating on the stock market will also help companies speed facilitation of bonus shares on the exchange and will encourage economic activities that will incentivise expansions, Dimian said. The government currently imposes a "discount and added" tax on the true value of business transactions at a rate predetermined by the Tax Authority. The government returns the tax value to the trader at the end of the year when the tax return is submitted. According to Dimian, raising the exemption limit on cash dividends to EGP 15,000provides protection for small investors whose portfolios do not exceed EGP 300,000, and reduces inequality between savings vehicles in banks and those on the exchange. The tax policies come as the start in a series of income tax reforms included in the coming budget, which is expected to earn more than EGP 10bn. "I understand the pressure being placed on us by stock market investors to impose a tax on the savings vehicles of banks similar to that of the stock exchange in order to keep their market competitive in attracting savings," said Dimian, "but imposing such a tax on banks with raise local borrowing costs and add an additional burden to the budget." Dimian said support from the IMF and other international bodies for the plans to apply tax on capital gains, which he said affirmed that the government is on the right track to economic reforms.
