Egypt bourse chairman rules out capital-gains tax

Egypt does not intend to levy any taxes on capital gains, Mohamed Omran, chairman of the Egyptian Stock Exchange, said Monday. According to Omran, a capital-gains tax would only serve to "distract" investors and potentially discourage them from investing in Egypt. Capital gains are profits realised by selling capital assets at prices higher than their purchase value. "Since 2008, a number of studies have been done on this issue," Omran stated. "I believe that application of this tax isn't suitable for an emerging market like Egypt's." Omran added that other countries with similar market conditions – and even many developed markets – did not apply capital-gains taxes. According to data from Ernst & Young LLP, Turkey, Mexico, South Korea and the Netherlands all have zero rates of taxation on capital gains. Rather, these countries all levy taxes on income from dividend receipts, a practice that is not implemented in Egypt. In mid-2011, then-finance minister Samir Radwan proposed a 10 per cent tax on dividend distribution in hopes of offsetting Egypt's budget deficit. The proposal, however, was quickly dismissed, and Radwan was removed in a cabinet reshuffle. "There's no place for this tax [in Egypt]," the bourse chief asserted, adding that Egypt's stock market should adopt policies making it more attractive to investors, especially foreigners. Maged Shawki, for his part, former head of Egypt's stock exchange, believes that a "balanced taxation strategy" would be more beneficial for Egypt. "There are many groups in Egypt currently demanding equality; more taxes must be levied," Shawki stated. "Other sectors must also be taxed, not only the capital markets." He went on, however, to say that a capital gains tax on major transactions was long overdue. "When I served as stock exchange chairman, I suggested the imposition of a capital-gains tax solely on corporate acquisitions, in the belief that this would accrue substantial revenue to the government – more than by simply imposing it on regular shareholders," Shawki asserted.