Egyptian Tax Dispute with Orascom Remains Ongoing

Egypt’s Tax Authority (ETA) has not dropped its case against Orascom Construction Industries regarding the latter’s tax evasion, said authority head Mustafa Abdel-Qader on Monday.

Abdel-Qader stated at a press conference that the tax evasion dispute with OCI, the Egyptian branch of Dutch company OCI NV, remains ongoing, as the company failed to honour its agreement with the ETA stipulating it pay EGP 7 billion ($1 billion) of tax arrears on 10 instalments between 2013 to 2017.

“ETA makes sure of its claims. OCI still owes us taxes,” Abdel-Kader commented.

In March, OCI NV had announced in a statement that the Egyptian prosecutor-general on 18 February “fully exonerated Orascom Construction Industries, the company’s Egyptian subsidiary, of any wrongdoing and all charges of tax evasion.”

The spark of the controversial dispute between the Egyptian government and the Sawiris family, who own OCI, was ignited during a speech by ousted president Mohamed Morsi in October 2012, where he alleged that Orascom had evaded EGP 14 billion ($2 billion) in taxes.

The accusation was made over the acquisition of Orascom’s subsidiary Orascom Building Materials Holding (OBMH) by cement giant Lafarge for $12 billion.

Additional income tax to be imposed

Abdel-Qader went on to point out that the newly proposed 5 percent income tax increase on individual and corporate taxpayers whose annual net income exceeds EGP 1 million ($0.14 million), is yet to be referred to the Cabinet.

In March, Finance Minister Hany Qadry announced the aforementioned tax rise would be applied for a three-year period to address calls for social justice raised during Egypt’s 2011 revolution – which brought down the regime of long-time autocrat Hosni Mubarak – as well as alleviate the financial imbalances exacerbated by three years of economic turmoil.

“[The 5 percent tax increase] is expected to receive the green light by the next fiscal year 2014/15 and it will pour around EGP 3.5 billion annually ($0.5 billion) on the public coffers,” Abdel-Qader estimated.

He revealed that these taxpayers would be able to pay their taxes in projects of public benefit, such as schools and hospitals.

Currently, those earning above EGP 250,000 ($35.8 thousand) yearly are taxed at a rate of 25 percent.

Corporate tax

In response to claims that state-run bodies pay far higher income taxes that private sector entities, Abdel-Qader said the difference was not enormous as taxes on sovereign authorities, such as the petroleum and Suez Canal authorities, register around EGP 115 billion ($16.4), while private entities are levied by EGP 81 billion ($11.6 billion).

Tax arrears

Abdel-Qader told attendees that the total tax arrears of the current fiscal year 2013/14 stand at EGP 74 billion ($10.6 billion), compared to EGP 69 billion ($9.8 billion) the previous year.

Around EGP 60.3 billion ($8.6 billion) out of the total arrears are under dispute between the ETA and taxpayers.

The ETA aims to collect EGP 17 billion ($2.4 billion) from the arrears by next June, so far succeeding to collect EGP 10 billion ($1.4 billion).

The finance ministry’s latest bulletin showed that the total taxes revenues recorded EGP 148.7 billion ($21.3 billion) between July and February 2013/14 against EGP 136.8 billion ($19.6 billion) during the same period of 2012/13.

The government expects total taxes returns of EGP 300 billion ($43 billion) by the end of the current fiscal year in June.

Source: Ahram Online