Monday 12/May/2025 – 12:27 PM
Over the course of 3 episodes of this series, the structural roots of the tax system crisis in Egypt, starting with the confidence gap between the government and the citizen, have reviewed, through clarifying the consequences of the semi -rentier economy on the exacerbation of the crisis, especially with the reliability of the outside as an alternative to production, to offering a scientific path to get out of this gap with clear mechanisms that suit the capabilities of the state.
In this closing part, I deal with previous attempts to develop the tax system in the Egyptian state, reviewing what these experiences witnessed from real reform ambition and great hopes, but with structural and political restrictions I obstructed the implementation and did not allow this ambition to fully verify until we reached this situation now as a result of many decades of postponing the actual reform decision.
In the first decade of the millennium, Dr. Youssef Boutros Ghali, the former Finance Minister, presented a model for what can be called technical tax reform, taking advantage of the moment of relative stability, broad political support, and a clear goal based on improving efficiency and compliance.
The most prominent features of this stage were attempts to reform the income tax through Law 91 of 2005 to reduce the slides and expand the base, then the gradual preparation for the application of value -added tax, and also enhance control and collection using a relatively simple technology at the time.
From collection to reform: stations in the development of the Egyptian tax system
These reforms have succeeded in lifting the tax proceeds as a percentage of local product, and a breakthrough in official revenue, but it was not a complete reform; As it was achieved without accompanying reforms in public spending or building confidence with the citizen, which made it closer to an improved collection, not to a new social contract, which enjoys the support of the people.
It soon witnessed Egypt during the following years repeated attempts to improve the tax environment, by providing tax incentives for special economic areas, supporting small projects, and reducing the burden on strategic sectors.
But these efforts, as the Andersen Egypt report showed, faced chronic challenges, the most important of which is the complexity of laws, policy fluctuation, weak confidence between financiers and tax administration, as it -according to the report -promoting confidence requires greater clarity in regulations, and government discourse that reflects a real partnership with the tax community, not just a collection of revenues, which was not available at the time.
Until the revolution came in 2011 and financial policies in Egypt entered a stage of confusion until 2015, where the long -term vision was absent, and the deficit was tackled through temporary partial solutions from lifting support without fair tax reform, and increasing indirect taxes without expanding the income tax base.
During this period, there was no clear political will to adopt a fundamental tax reform, so the system remained unfair, complex, and excessively dependent on indirect taxes.
Since 2016, with the increasing involvement with the International Monetary Fund, the features of a more modern approach under the leadership of the Deputy Minister of Finance at the time, Ahmed Kojk, who represented a new school in financial thinking that is more flexible, and more familiar with the language of markets and international institutions.
Despite the government’s commitment to a number of expansion measures, Kojk adopted a different line in the tax reform file, its most important features expanding the base through digitization, not by raising rates, creating the electronic bill system and the integration of databases, and refraining from compromising the extensive exemptions in the value -added tax, despite the recommendations of the fund.
Here was the difference, while the IMF pushed a comprehensive review of the exemptions, Kojk preferred not to fight a political battle with sensitive economic sectors, instead bet on improving compliance and enhancing confidence among investors that the state would not surprise them with shocking tax policies.
This is what was one of the meetings that Kojk conducted with the fund mission, where he clearly indicated that Egypt needs a period of tax calm, and that stability in policies is more important than maximizing the immediate outcome, and this approach, and if it seems conservative, it has reflected a deep awareness of the possible political and economic limits.
But these steps were met with a degree of reservation within the corridors of the fund, where some experts saw that what is going on is an administrative reform rather than structural reform that focuses on improving compliance and developing systems without fundamental treatment of exemptions or tax justice variations.
Where administrative reforms remain important, but they do not achieve the desired transformation in mobilizing revenues, despite the progress in digitization and administrative reforms, international experiences and the recommendations of the Monetary Fund for Egypt confirm that these measures do not generate more than 0.5 to 1% of the GDP, and that achieving an actual increase in revenue by 3 to 4% requires structural reforms in the tax policy that includes the expansion of the rule, processing of distortions, and distortions, And rebuilding trust between the state and the financier.
Nevertheless, it can be said now, that Kojk was betting on a different dimension, especially since trust and institutional stability, even if they seemed technicians, may threaten the way later to reform more radical, when the political and social environment is more willing to bear its cost, so that the real challenge remains that the days are proven by the relegation of this option, that digitization succeeds in controlling the informal economy, and that confidence begins to turn into a partnership It is consumed by the general budget of the state 2025-2026 digitally.
The data of the new budget project indicates a leap in the total revenue by about 23% compared to the previous year, to reach 3.12 trillion pounds, and that 85.1% of these revenues will come from tax revenues, which are expected to grow by 27.6%, and in return, parallel increases in tax rates or the widening of the burden on the official economy appear.
It is clear from this that this growth in the outcome does not reflect increases in tax prices, but rather an improvement in tax collection, which confirms that the government is relying on digitization and horizontal expansion of the tax base more than resorting to sudden or forced collection, and although this trend remains surrounded by the challenges of implementation, the numbers indicate that there is a clear bet on deep administrative reform, not only to glorify Revenue.
What Kojk did -since he was a deputy minister of finance -was in essence, an attempt to make a gradual transformation without breaking the existing balances, as these reforms may not have made a qualitative leap in tax justice, but it represented a shift in the philosophy of managing the system itself from sudden collection to institutional organization.
The real bet remains whether digital transformations and institutional approaches are able to overcome the tax character of the tax, and turn it into an effective tool for the production of development justice, not just a tool of achievement .. The tax is not the enemy as I mentioned earlier, but the enemy is the absence of institutional reform that must be linked to a real productive economy because as the country that does not produce live on the rent, the country that does not fit .. lives.
