By Ahmed Allam
Cairo – Mubasher: The Egyptian Supreme Investment Council's (SIC) decision to freeze tax on capital gains for three years will have a positive impact on the capital market, analysts told Mubasher.
On last Tuesday, the SIC, headed by president Abdel Fattah Al-Sisi, adopted seventeen measures aiming to boost the investment climate in Egypt, including an array of tax exemptions for farmers producing strategic crops and goods.
In July 2014, the government levied a 10% tax on capital gains from shares in an attempt to back the drained budget, but implementation has not been in effect since August 2015 until 17 May 2017.
"Another three-year suspension of capital gains tax was a big surprise to all analysts namely after a number of strict measures were applied by deputy finance minister for tax policies that were signaling for an immediate enforcement following May 2017", said Mohamed Saeed, a managing director at IDT Consulting & Systems.
On the short term, this decision will give new momentum to EGX traders as it could create future incentives and provide a completely different outlook for the investment climate in Egypt rather than the stereotypical image, Saeed added.
In addition, the five-year exemption from taxes on strategic exports and imports will open the door wide for the revival of small and medium-sized enterprises, which are the backbone of economies, said Saeed Al-Feki, CEO of Osool ESB Securities Brokerage, believing that Cairo bourse, on this tax freeze along with a possible devaluation, will likely shoot above faster and solidly target new resistances.
"Capital gains tax freeze will significantly increase the equity market's liquidity as compared with the pre-2011 revolution levels. We are waiting for a soon solution to the exchange rate glitch for bringing our economy back to life, which will have an impact on indirect investment", Al-Feki clarified.
