Egypt cabinet approves draft law lifting tax exemptions for state bodies

CAIRO (Reuters) – Egypt’s cabinet has approved a draft law to eliminate tax exemptions for state entities in a bid to attract private investment, a cabinet statement said on Wednesday, but the law appeared to retain at least some privileges enjoyed by the army.

Egypt, in the midst of a severe foreign currency shortage, has been seeking to encourage both foreigners and Egyptians to invest more.

Many investors have hesitated out of concern that state-owned enterprises, including those owned by the army, use tax exemptions and other privileges to compete unfairly.

The International Monetary Fund in a $3 billion financial support agreement signed in December urged Egypt to level the playing field between the private and public sectors.

“The approval is part of the Egyptian state’s desire to improve the investment climate and support private sector participation in various economic activities,” the cabinet statement said.

Some activities would remain tax exempt, including those enshrined in international agreements, those that provide basic infrastructure services, and those needed for national security, it said.

The scrapping of exemptions would be implemented “without prejudice to … exemptions prescribed for works and tasks related to the requirements of defending the state and protecting national security,” the statement said.

The military, as well as other security institutions, are exempt from value-added taxes for goods and services needed for armament, defense and national security under a 2016 law, from real estate taxes under a 2015 decree, from income taxes under a 2005 law and from import tariffs under a 1986 law. The Ministry of Defense can decide which goods and services qualify.

The new draft law still requires approval by parliament and the president.

(Reporting by Momen Saeed Atallah; Writing by Jana Choukeir and Patrick Werr; Editing by David Goodman, Aidan Lewis, Alexandra Hudson)