Forging Egypt's Economic Future: Assessment of Tax Reforms and Technological Advancement
Updated 3/11/2025 8:00:00 AM
Arab Finance: In an Exclusive interview with Arab Finance, Sherif Shawki, ME TLS Clients and Markets Leader and Country Tax Leader – Kuwait and Egypt at PwC, confirmed that Egypt has become an attractive market for many investors in the field of exporting services abroad.
This field has a positive impact on the Egyptian economy, especially in attracting foreign currency to the country, offering job opportunities, and contributing to reducing unemployment.
Shawky added that the PwC is already investing, aiming to expand its activities in Egypt over the coming period. Below is the full interview:
1- Can you tell us about PwC's activities and its expansion plans in Egypt?
PwC is present in more than 160 countries around the world, operating within the field of tax, consulting, strategy, deals, assurance, and financial services. We seek to expand in Egypt in the coming period.
PwC Global has chosen Egypt as a service hub for information and technology, recognizing it as one of the best countries to support this field. Egypt is currently an attractive market for investment and has become more competitive as compared to other markets like India which already has many service hubs based in it.
2- How do you see the development of the tax system in Egypt?
We currently have new tax systems in Egypt, including the e-invoice system, which did not exist before as an alternative to the paper invoice. Egypt now has a digital system for unifying the basis of calculations and reporting of wages and salaries taxes.
The Ministry of Finance and the Egyptian Tax Authority (ETA) have developed their basic system and are in the process of developing the real estate tax. Heavily relying on technology and digital transformation in tax systems, Egypt now has the Commercial and Industrial Profits Law, the value-added tax (VAT).
The country also has other types of taxes, such as payroll tax and income tax, in addition to international legislation and laws related to the 15% minimum tax imposed on multinational companies operating in Egypt.
Therefore, given the technological developments around us, companies must have tax compliance with all these laws by submitting tax returns and financial reports to the company and the board of directors on a regular basis.
The matter does not stop there, companies shall comply with monthly, quarterly, and annual tax returns, as well as periodic and computerized audits. Databases have become the basis for any technological development and tax compliance.
3-How do you see digital transformation evolving?
Digital transformation is now a key element in the business sector, driving global companies and the business community, such as Uber, Netflix, Amazon, Talabat, Google, and other international companies.
These companies rely on technology and digital transformation in their work, operating without a fixed headquarters. And we now see continuous and daily work on electronic platforms for many users.
A new growing trend by companies is to shift towards environmentally friendly industries and reduce carbon emissions. This trend has become very influential in the business and economic fields.
Consequently, all these transformations have driven companies to keep pace with technological developments and new laws through a new economic model by complying with all these international and local changes.
4-As a partner in one of the largest global tax consulting firms, do you believe that the current laws in Egypt encourage investment?
Last year, we saw significant development in the manufacturing sector. Chinese, German, European, and American companies have started operating and injecting more investments into Egypt in transportation, automotive, and electronics industries, as well as service centers that export services from Egypt to foreign and European countries.
Egyptian exports have increased in both volume and value and foreign governments showed a noticeable interest in direct investment in Egypt. For example, the Saudi Public Investment Fund (PIF) and the UAE have injected many investments into the Egyptian market.
Thus, Egypt now has promising opportunities for industrial and technological development, thanks to its human capital and well-qualified Egyptian personnel, both educationally and technically. It also has a large and robust market for trading, consumption, and sales.
Regarding Egypt’s current legal framework, I believe that laws should keep pace with these economic and technological developments. They are sufficient for the current stage but need a policy and a general framework to understand the extent of future development in line with international developments, while generalizing all local and international developments to the entire business.
5-How do you assess the taxes imposed on small employees, especially with the increase in income and their transition from one tax bracket to another?
Any tax system in any country in the world has more than one axis in its application, whether on transactions or trade. For companies that deduct tax at source, it is a tax paid in advance, and companies have the right to deduct it in the annual return.
For employees, it must be deducted when receiving the employee's monthly salary. This is called personal income tax, not withholding tax. However, companies are taxed annually and must pay it annually on time.
Herein lies the benefit of the unified system, which aims to unify the system and activate it technologically so that there is no room for error in calculating personal income tax. Applying this type of tax has experienced errors in the past, but activating the unified system will prevent these errors.
6-How do you view the government's approach to integrating the informal sector into the formal economy and the tax system?
I believe that if the informal sector does not integrate into the tax system and the formal economy, it will eventually fall outside the scope of the business system. As it operates outside the formal market, it will struggle to find anyone willing to deal with it in the future.
All companies deal with each other using the electronic invoice system, and during tax audits offer benefits for companies that comply with this system. This ensures the ETA does not impose burdens and taxes beyond what is fair.
Therefore, entering the tax system and the comprehensive and formal economy will be everyone's interest. This allows companies to have their expenses approved by the ETA and ensure taxes paid are fair, contributing to financial inclusion.
7-What challenges do you see facing the tax system in Egypt?
Egypt’s tax system and companies face several challenges in the current stage, including electronic compliance, digital transformation, and automation. Some companies consider this as an additional burden on them. Another challenge establishing a fair tax policy that regulates the legal framework.
Inflation, rising prices, and the recent currency flotation also pose as a challenge for the business community in Egypt. Companies are supposed to record the exchange rate differences they incur, as well as price inflation, in their books.
PwC helps companies in these matters. I believe that a stable tax policy is key to dealing with investors and reassuring and encouraging them to invest in Egypt. As a developing country, Egypt relies heavily on tax revenue as a tributary of the state's public treasury, which helps it develop.
Egypt’s tax system is not far from other countries that impose taxes, such as the UAE, which has a budget surplus and yet imposes taxes. However, we need clear tax constants for any investor coming to invest in Egypt.
8-How do you view the risks of dealing with digital currencies and digital assets, which have not yet been approved by the Central Bank of Egypt (CBE)?
Digital currencies are one of the axes of development in the global business community. However, in Egypt, dealing with them is not permitted under the policies of the CBE, and no laws regulate them.
However, many countries in Europe and North America deal with them, with companies there investing and trading through digital currencies.
They rely on supply and demand and are also subject to taxes, but some companies have made large profits, and others have incurred greater losses as a result of the large rise and fall that occurs in these assets and digital currencies.
9-What is your assessment of the tax reform package recently announced by the Egyptian government?
It is very good as it aims to integrate the informal sector into the formal economy without tax accounting for the past work of these companies operating outside the formal sector.
With tax accounting starting in 2025, companies would overcome past problems and disputes with the ETA. This also enables them to register with the ETA and overlook the past.
Activating these reform packages in the Egyptian tax system will make things much easier for taxpayers in general.
10-How do you view the problems of the long customs clearance process for goods in Egypt?
The customs process is one of the most critical files facing companies in Egypt at the present time, especially with the long customs clearance period for goods. Shipments are supposed to take about three hours to be cleared, but unfortunately, the process takes much longer than this period.
Therefore, we need to facilitate export and import operations, especially for companies with a good record with the Egyptian Customs Authority (ECA), to help develop the business community in Egypt.
Currently, customs operations in Egypt are not at their best condition due to the absence of an effective electronic system that supports exporters and investors, especially those related to customs and tax documents.
An electronic link between the tax and customs systems within the Ministry of Finance and its electronic system is essential, particularly an electronic link between both the ETA and the ECA.
Such integration would facilitate processes for obtaining export support, which encourages Egyptian companies to export and compete in global markets. Unfortunately, these procedures are not activated on the ground.
11-How do you assess foreign service centers in Egypt from a tax perspective?
Foreign companies in Egypt are among the most committed companies to paying taxes regularly. Service centers have a strong impact on the Egyptian economy, especially companies operating in the field of services and technological and digital solutions, as they export abroad. They export to countries like Germany, Britain, and other European nations.
For example, one service center with about 2,500 employees supports the Egyptian economy by bringing in hard currency to the country and reducing unemployment.
The state is currently encouraging the operation of service centers, as their capital cost is not large compared to the returns they achieve for the Egyptian economy. These companies enjoy significant tax advantages.
12-How can tax revenue be increased in Egypt?
We have presented a vision to the Egyptian government to increase tax revenue, especially in light of ongoing development and the increase in Egyptian competition with other countries in the field of developing tax legislation in these countries.
For example, companies such as Hassan Allam, Elsewedy, and Arab Contractors have branches in foreign countries, and the Egyptian government can collect the tax of these companies for the benefit of the Egyptian public treasury.
To achieve this, it requires the development of Egypt’s tax legislation in line with international laws, and I confirm here that there will be no double taxation and no fear at all of this matter.
13-How do you see the imposition of tariffs by America on some countries?
Some statements in this regard are being announced, and then they are quickly retracted, which highlights the current instability in the economic system at the moment. The US is a country of institutions, and I believe if harm occurs, these institutions will take action to correct the situation.
We noticed when the US imposed tariffs on Canada, Canada responded by imposing 25% tariffs on American imports, which will lead to a reduction in US exports to Canada.
The problem here is that companies are the ones harmed by these policies, as well as the increase in inflation and costs for manufacturing and exporting companies of these products.
These policies will negatively affect the global economy. We have seen what China did by stopping American exports for a week, resulting in large losses for US companies.
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