The Egyptian Ministry of Finance announced that it will fully exempt those who receive an annual income of up to EGP 22,000 from income tax, adopting a new tax system, which will achieve justice for all, especially lower-income brackets.
"An employee in the old tax system benefits from a personal exemption of EGP 7,000 and another tranche at a value of EGP 8,000, meaning that the total current exemptions is EGP 15,000, while the new tax system will deduct an additional EGP 7,000 for a total exemption to EGP 22,000," the statement pointed out.
The Ministry confirmed that the income tax will be fair in the new tax law, addressing distortions in the current system, which is based on progressive tax system.
The ministry added that this deduction achieves tax-savings for the lower, middle and upper-middle income brackets. When moving from a current bracket to a higher one, it does not mean collecting progressive taxes as it is in the current tax system, which caused a Marginal Tax Rate effect.
"When moving from a salary bracket of the EGP 30,000 to a higher one, the employee’s tax increases several times even if the income exceeds the bracket by only one pound, and at the same time, for the 45,000 pound bracket, one pound increase doubles the income tax," the ministry said in an example, referring to the current tax system.
"If we compare the monthly income and the tax due under the current tax system, and the new one, advantages of the new system will become clear, as it aims at achieving more tax justice and ability to tackle existing distortions," the ministry concluded.
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