IMF: Egypt Bourse Tax Delay means Rich pay less to cut Deficit

The International Monetary Fund criticized on Sunday Egypt’s decision to delay imposing capital gains tax on stocks because it means that the cost of shoring up public finances will be borne by “people who are less able to afford it.”

“We are disappointed that the capital gains tax has been postponed,” Chris Jarvis, the lender’s Egypt Mission Chief, said in an e-mailed response to Bloomberg’s questions. “This was a tax which raised needed revenue and which was fair.”

Egypt’s benchmark EGX 30 Index for equities climbed the most in almost two years on May 18 after the decision to postpone the 10 percent tax for two years, which officials say aimed to make the stock market more competitive.

The government has struggled to raise more money from wealthier Egyptians as it seeks to narrow one of the biggest budget deficits in the Middle East. In March, officials canceled a 5 percent surcharge on the highest-earners, just nine months after it went into effect. They also reversed an increase in the top rate of income tax introduced in 2013.

Postponing the capital gains tax “will mean that more of the cost of reducing the budget deficit will now be paid by people who are less able to afford it,” Jarvis said.

Egypt reached two initial loan agreements with the IMF since the 2011 uprising that toppled former President Hosni Mubarak before withdrawing the requests. It turned instead to its Gulf Arab allies for billions of dollars to meet its financing needs.