The newly-appointed head of the authority created to administer and develop Suez Canal megaproject criticised the government’s unified income tax ceiling as too high to allow the creation of a special economic zone that can compete globally.
“Unfortunately, we have a 22.5 percent tax… The minister of finance is trying to close the deficit gap. We beg to differ on that,” said Suez Canal Economic Zone Authority Chairman Ahmed Darwish, in his first public appearance at an AmCham event in Cairo on Monday.
The income tax was raised on special economic zones from 10 percent earlier this year, a move which Egyptian Finance Minister Hany Kadry said was needed for the state’s coffers to benefit from the fact that 30 to 40 percent of Egypt’s Gross National Product will be generated in such zones within the next ten years.
But Darwish suggested the tax would hurt the zone’s competitiveness against similar special economic zones internationally, such as the tax-free port town of Jabal Ali in the nearby United Arab Emirates.
A flagship project for President Abdel-Fattah El-Sisi, the special economic zone will cover an area of 461 square kilometres across the three Suez Canal governorates of Suez, Port Said and Ismailiya, and will include six maritime ports once it is completed by 2045.
“I’m trying to get someone to do a detailed study because the claim of the ministry of finance is that most multinationals…don’t pay taxes [in Egypt] and pay 28 percent in their own country…but some of these companies are probably registered here [in Egypt] and elsewhere; they are not registered in countries where they pay 28 percent [tax],” said Darwish.
“Once we have the numbers in place…we can actually have a better platform to start discussing what is the correct taxing [rate],” he explained.
Darwish said also that he would work to cancel customs at the six ports in the zone, which is customs-free by law.
The zone is expected to include an international logistics hub and areas for light, medium and heavy industry as well as commercial and residential developments.
President El-Sisi appointed Darwish as head for a three-year term late last month, as he launched a mega development project east of Port Said which falls under the scope of the zone.
The authority will act as a regulator for the zone, as well as a one-stop-shop for investors to obtain licenses and registration for the projects in the zone, bypassing the cumbersome bureaucracy of different government bodies.
The authority is vested with the powers to make decisions independent of cabinet approval, explained Darwish, with the exception of the ministries of defence, interior, foreign affairs and justice, “so the legal framework is very flexible…and the decision-making is very centralised,” he said.
It is unclear how the authority would secure stable funding in the absence of appropriations mechanisms.