Egyptian traders have condemned a decree by the Egyptian Tax Authority (ETA) to assess the net profit of small and medium enterprises in order to impose the 20 per cent tax more easily.
ETA issued decree 42 at the end of November, which aims to assess ahead of time to the net profit of SMEs whose annual working capital is less than EGP1 million, as a way to deduce 20 per cent from their profits, said Mamdouh Omar head of the ETA.
The decision planned to assess profit of specific SMEs in the areas of small medical clinics, industrial security, fire fighting, land subdivision and broking, and general contracting and its extensions, according to Al-Borsa newspaper.
“This decree cannot be applied as it’s very difficult for the ETA to determine the cost of products which differs from one company to another,” said Ahmed Sheha, head of exporters section of Cairo Chamber of Commerce.
Sheha added that the costs of many products cannot be determined easily, especially electricity, natural gas and raw materials. Furthermore other products are interdependent, for example an increase in oil prices will lead to price increases of many other products.
“The decree has been viewed from an academic perspective, ignoring the real market needs and nature,” said Sheha.
Sheha added he thought that such a decree might be more easily applicable on large companies which have less competition, like sugar and rice factories.
The deputy head of the foodstuffs section of the Egyptian Chamber of Commerce Amr Asfour said the mechanism for applying the decree was very complicated, and the ETA has to simplify taxes more on SMEs.
“Small supermarkets are in competition with large hypermarkets; however hypermarkets are provided special offers and discounts from large companies in a way that guarantees their profits, while small supermarkets have smaller profits and sometimes are profitless,” said Asfour.
“The whole law of imposed taxes on small and medium sized companies is unfair, and there should be more motivation,” he continued. “Net profit is determined according to many criteria; the expenses, revenues and the cooperating cycle. Due to the current economic situation, the cooperating cycle has decreased, revenues have decreased and consequently net profits have decreased.”