Bill requiring state companies to share profits with treasury could allow exemptions for powerful entities, sources say

Broad exemptions in a new bill to levy a tax on all state-owned companies’ profits could allow the government to give favorable treatment to powerful state actors, sources familiar with the drafting of the legislation told Mada Masr. The measure is intended to raise public revenues by creating a payment obligation that applies only to state-owned companies. A parliamentarian and a government source told Mada Masr that the vague wording of the exemption provision leaves significant room for discretion, allowing the state to shield powerful entities from a levy imposed on the rest of the state-owned sector. The government-drafted legislation, approved by the House Planning and Budget Committee on June 1 and awaiting a final vote, is part of measures linked to Egypt’s loan program with the International Monetary Fund. The IMF’s fifth and sixth reviews list the law among measures expected to contribute to the government’s goal of increasing tax revenues by one percent of gross domestic product in fiscal year 2026/27. Under the draft law, reviewed by Mada Masr, companies wholly owned by the state or public legal entities would be required to transfer five percent of their net profits to the treasury after covering accumulated losses. Companies in which the state holds more than a 50 percent stake would transfer four percent, after lawmakers introduced an amendment that raised the ownership threshold from the 30 percent proposed by the government. According to a member of the House Economic Affairs Committee who reviewed the bill, the measure is intended to guarantee a steady revenue stream to the treasury regardless of how companies choose to distribute their profits. The payments would be treated as a priority debt, ensuring the state receives part of companies’ earnings even if profits are to be retained for reinvestment. Yet the bill also provides for exceptions. Under the draft, the prime minister would have the power to exempt companies from the levy at the recommendation of the finance minister, following a request from what the legislation describes only as the “competent authority.” The bill does not define the circumstances under which exemptions may be granted. Both the parliamentary source and a Finance Ministry tax expert told Mada Masr that the provision creates room for selective application of the law. The absence of clear criteria could allow certain state institutions to avoid the levy while others remain subject to it. The parliamentary source argued that the vague wording suggests that the law was designed to make it easier for institutions with greater political weight, such as the Armed Forces, to obtain exemptions from the levy. Military-affiliated companies are a major component of the state economy, with the National Service Projects Organization owning 97 companies across the industrial, consumer goods, service and infrastructure sectors. The new law also runs counter to the reforms adopted in 2023, when Parliament passed a bill abolishing a range of tax and fee exemptions enjoyed by state-owned entities in relation to their commercial and investment activities. The Finance Ministry source explained that the new legislation reintroduces tax discriminations, even if, now, they are theoretically to the detriment of state-owned companies. The source argued that some form of tax discrimination can be useful but the new law will put state-owned companies that do not have exemptions on the back foot. “For example, oil companies are subject to a higher tax rate, but this does not disrupt competition among companies operating within the same sector,” unlike discrimination based on ownership, the source noted.The post Bill requiring state companies to share profits with treasury could allow exemptions for powerful entities, sources say first appeared on Mada Masr.