Head of the Egyptian Public Tax Authority (PTA):
“The automated taxpayer document inspection system will be applied within three months”
“The investors do not seek tax cuts but rather stable tax policies”
By Abdul Fattah Fayed
A number of recently issued financial, legislative and tax reforms have been carried out, most notably application of value added tax (VAT), which will replace previously applied sales tax, and the Law of Tax Dispute Settlements. Moreover, the proposed amendments to the Investment Law including a proposal to re-grant tax exemptions. The PTA is the body responsible for carrying out all these financial reforms. We met the Head of the PTA Abdel Moneim Matar and conducted the following interview:-
What recent developments have been made in improving tax administration and creating a favorable working environment in the PTA?
The tax administration will be improved through using IT and data cleansing systems to check income tax statements and using a unified registration number in all tax offices, particularly in the Public and Value added Tax Authorities as well as the Egyptian Customs Authority. Data cleansing will help organising work in tax offices, as they will only be responsible for examining and checking tax statements. Therefore, no statements will be checked in many tax offices. Moreover, using national ID numbers does not provide access to all relevant bodies that provide services to the taxpayers and we, therefore, will create a database against which data contained in tax statements can be checked and verified.
Has the PTA developed a plan for re-conducting tax field surveys on the parallel market on the back of its growing activity compared to the formal sector?
We have already implemented an integrated plan for conducting tax field surveys on those who are covered by the tax laws and are not registered at the PTA. The tax offices have been instructed to conduct tax field surveys and collect data on the parallel market. Moreover, they have also been instructed to charge a number of their staff to help its Tax Survey Department in conducting tax field surveys in order to determine the taxpayers population, particularly unregistered entities and those who do not comply with the tax laws, every week for a period of 3 months after the 1st of November. A client list of a number of major taxpayers has been obtained and distributed to the geographic tax offices in order to determine the taxpayer population and collect their state taxes.
How will the PTA determine the taxpayer population after the application of the value added tax?
The Law on Value Added Tax has introduced a general tax to be imposed on all goods and services as well as all income revenues, excluding basic commodities (tax exemption table). After examining records of taxpayers registered at income tax departments, new taxpayers who are subject to tax for the first time, were determined and all geographic tax offices have been notified of these taxpayers. 130 thousand new taxpayer have been entered into the computer system at the income tax department and we are currently working on registering them and making them aware of provisions of the law in collabouration with the taxpayer help and support departments.
How will the PTA address objections made by a number of taxpayers in relation to VAT Registration?
The PTA is merely a law enforcement body and has no power to amend legislations. Therefore, all what we can do to address these objections to the value added tax and its enforcement is to hold meetings with these taxpayers in order to explain the law and make them aware of its nature and application. Moreover, we will develop simplified methods to calculate and collect the value added tax based on the nature of every activity and service, which will be taken into account when preparing the executive regulation of the law.
How long will it take to complete the executive regulation of the law?
The executive regulation of the Law on Value Added Tax is currently being prepared and is scheduled to be issued within one month after issuance of the law as per article No. (70) of the Insurance Regulatory Law. The preparation of the executive regulation will take a long time, as the PTA and the Ministry of Finance strives to issue a clear executive regulation, which will not need any interpretations and periodicals. All business activities that are subject to the tax will be taken into account and meetings with representatives from these activities are currently being held. We have already met with owners from 20 different business activities that are subjected to the tax and all their proposals and requests will be taken into consideration when preparing the executive regulation. Moreover, the executive regulation will be submitted to the tax community for remarks and it will be issued in a way that best serve interests of all relevant partners.
After the first quarter of the fiscal year ended, has the PTA achieved its targeted tax revenues?
The tax revenue growth rates have improved compared to the previous year. We have achieved 100% of the general sales tax target and 97% of the income tax target, excluding major revenues represented in revenues from the Suez Canal, the Central Bank of Egypt and the General Petroleum Corporation. The value added tax revenues will be included in the tax statements to be submitted until 30 November.
How will the PTA overcome the problem of exchange differences generated by devaluation?
We will hold meetings with affected taxpayers and their legal accountants to know their views on overcoming the crisis of exchange differences. We have also developed a proposal that was submitted to the Deputy Minister of finance for consideration in order to take the appropriate decision to resolve this crisis. The proposal tackles increase in expenses that are not registered in books according to the executive regulation of the Income Tax Law No. 91 of 2005 and it will be implemented for a specified period until the exchange rate crisis is resolved.
Has the PTA begun enforcing the Law No. 79 of 2016 on resolving tax disputes?
We have already started receiving requests at our tax offices according to forms designated for that purpose. The ministry is currently forming committees stipulated by the law in order to consider all issues and disputes submitted to the High Arbitration and Grievance Committees.
In addition, issues and disputes submitted to the existing appeal committees that are responsible for considering income tax appeals. The unsettled appeals submitted to the courts and the internal committees as well. The tax distributes include criminal and civil disputes filed by individuals and companies. We hope that this law will strengthen confidence between the taxpayer and the PTA during the one-year term of law application. This law will save the state money and effort and will help collecting taxes on timely basis. Moreover, the registered taxpayer who wishes to benefit from this law must submit a tax dispute settlement and reconciliation request to the committee formed to examine and resolve disputes. When the taxpayer submits a reconciliation request, the competent dispute settlement committee will consider this request and provide solutions to the taxpayer. If he/she is satisfied with the solution, a reconciliation report will be filed and a copy thereof will be referred to the court. This report will be deemed as a decision to resolve dispute, the court, therefore, will issue a ruling that both parties of dispute have reconciled.
Has the PTA prepared to implement tax reforms, particularly reforms relating to staff training?
The Ministry of Finance strives to improve tax system through tax legislation, management and policies. The PTA staff is definitely part of the reform process; however, this reform will not be achieved unless we have a tax community that is fully aware of tax importance and its necessity. Moreover, both the PTA and the taxpayers need to cooperate so that the informal market cannot exploit application of the Value Added Tax Law in a wrong manner, which will lead to over soaring prices. The PTA’s main goal is to deliver the goods to the end customer at its actual increased prices not its over soaring ones. The PTA provides training to its staff and improves its information technology, and networks in order to equip the tax offices with all needed equipment. All these efforts are made in order to ease and simplify relationship between the taxpayer and the tax officer.
How will the PTA overcome the problem that the taxpayers do not issue tax invoices?
Discussions have been made with a number of companies in coordination with the federations of Chambers of Commerce and Industry with a view to facilitating a link between the PTA and companies.
If applied, transparency will be achieved and the tax officer will save his/her time, as he/she will have all required information. Moreover, the companies won’t be also save their time and there will be no delay in tax payment.
It will also help reducing tension between the taxpayers and tax officers, which will eventually regulate the tax community. Given the privatization, the state tax revenues are now dedicated to providing tax services. Therefore, the taxpayers must collabourate with the PTA to generate sufficient revenues so that the government can spend them in order to provide required services. The applicable tax laws include penalties for those who do not appropriately issue tax invoices, which primarily aims at regulating and controlling the tax community.
What measures have been taken to implement the automated taxpayer document inspection system?
We have already developed a simplified software that will check the document status and an automated inspection system will be used to verify data contained in the zero tax return statements and submitted documents that do not include a tax statement. This software has been tested in four tax offices and will be used throughout the PTA. The Ministry of Finance, through the Deputy Minister of Finance for Tax Policies, in coordination with the Assistant Minister of Communications and Information Technology are currently developing this software. The software will collect all data relating to the taxpayer and his\her sales and value added tax statements as well as data relating to tax collection and deduction included under tax calculations, export and import statement and all other taxpayer’s financial transactions submitted to the tax office. The software will also collect data relating to the taxpayer’s income tax statement and provided data on his\her financial transactions and activity. All these data will be checked using the automated inspection system, which will save the time of both the tax payer and the PTA, provide detailed information and data, and help checking as many documents as possible in less time. Moreover, it will also reduce tax disputes raised between the taxpayers and the PTA as the inspection will rely on reliable actual data and will help reducing tension between the taxpayers and tax officers. It will also help in obtaining data related to other taxpayers, who must be registered in the system, and will require them to comply with the law. The system will also check whether clients and suppliers of the taxpayers have submitted their statements and have paid the due taxes imposed on their financial transactions made with the taxpayer.
How long will it take to apply the automated inspection system?
The system will be completed, reviewed and tested within three months at maximum.
What do you think about re-granting tax exemptions in the proposed amendments to the Investment Law?
The Ministry of Finance in coordination with the PTA are currently examining these proposals in order to be aware of its impact and implications on the tax laws. Most importantly, the investors do not seek such tax cuts, which they give low priority among other important factors. The investors are only concerned with stability of tax policies. The Egyptian tax policies have already been stable since appointment of the current cabinet and a tax policy specialist has been appointed per case in order to achieve this goal. After all, the PTA is merely an executive body that implements the fiscal, tax and financial policies approved by the government.
