Egypt’s benchmark stock index, the world’s third-best performer in May, may fall after the government unveiled a capital gains tax on dividends and higher corporate tax bracket to rein in the budget deficit, EFG-Hermes Holding SAE said.
“The immediate reaction of the stock market to any tax increase is in most cases negative because investors assume a decline in profitability,” said Wael Ziada, the head of research at Cairo-based investment bank EFG-Hermes. “The market should see a mild decline as it seeks more clarity about how the tax will be applied.”
The North African country will levy a 10 percent capital gains tax starting next fiscal year on dividend payments, mergers and acquisitions and asset revaluations, Minister of Finance Samir Radwan said yesterday. The government also plans to raise taxes for companies with profits of 10 million Egyptian pounds ($1.7 million) or more per year to 25 percent from 20 percent.
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