Untitled Document

Direct and indirect taxes play an important role in any economic system. Taxes provide the Treasury in Egypt with the biggest part of revenue necessary for national spending. Taxes income in advanced countries represents a big ratio of total income, it represents between 30 to 50 % of national product in countries such as the USA and Canada, while it represents from 10 to 11 % of national product in Egypt.

Considering the tax system in Egypt before adopting the recent amendments, it has been proved that it has a number of negative features :-

1- Tax laws do not provide encouragement to investment.

2- Taxes concentrate on the element of tax revenues without comprehensively considering the total economic trends.

3- Audit, assessment, and collection system depends on the administrative assessment of tax administration.

4- Inadequate workplace environment, treatment, wages and salaries. Bargaining and haggling is the main feature of relationship between taxpayer and tax authority. The taxpayer is guilty until proved to be not.

5- Lack of confidence between taxpayer and tax authority, and the failure of businesses to adhere to keep books and records or file tax returns.

These issues had to be considered for preparing an integrated system, adopting essential amendments to the working system environment and modernizing the tax administration.

As a result, Income Tax law was amended and the Sales Tax law is underway ( to be updated and amended as a VAT law ), in addition to the amendment to customs duties. All this by applying the methods and techniques used by most countries and brought about tangible positive results. Our objective was to start from the others concluded through working out a vision and strategy to govern our work.

Our vision is " to provide a modern tax administration that enables the taxpayer to understand their rights and to be committed to their tax obligations through fair and simplified tax laws for all taxpayers equally."

Our strategy is to achieve this vision through :-

1- Laying down a suitable frame of tax policies which include : - drafting new laws equal to taxes, observing the international developments and making good use of those which cope with our local conditions, preparing the international agreements, and evaluating the effects of change and development suggestions including the exemptions.

2- Enacting and establishing clear and simple legislations and procedures for both the Income and Sales taxes.

3- Preparing for full merger between Income Tax and Sales Tax departments. This is an approach currently taken by most countries and it achieves some objectives including :-

- One agency to deal with the taxpayer in terms of all their tax obligations.

- One audit system for regulating work and maximizing the benefit from the available resources.

- Saving effort and time for both the taxpayer and the revenue departments.

- Downsizing the workforce and reducing the cost.

4- Categorizing the taxpayers according to their size ( large, medium, and small ) and laying down working systems for each category to provide a fair, stringent, and simplified treatment methods.

5- Designing organizational structures on a functional not a specific basis to prepare for merging between the income tax and sales tax. The establishment of the LTC is an expression of this vision and a step towards the tax system reform in Egypt. It has been proved that most of the countries have a clear similar feature; a small number of large taxpayers generating the biggest portion of tax revenues. In Egypt from about 2000 to 3000 taxpayers contribute to about 75% of income and sales taxes revenues. Those taxpayers are an organized sector and keep good books and records. They also deal with the biggest accountancy firms of good repute and distinguished experience. This is why there was a strong desire to select the best employees from both departments with a view to forming the LTC administrative structure to meet the requirements of a fair, new policy starts with trust in taxpayers and researches for establishing the credibility through an efficient and integrated information system. This comes along with providing the best advanced technological services to facilitate dealing with those taxpayers and providing all kinds of resources necessary for LTC. Furthermore, providing the LTC staff with the best preparation and training programs to be highly qualified and applying the international standards in selecting the large taxpayers. These standards mainly concentrate on the turn over of a business.

We believe that the current business will lead to the success because the conditions and components of this success are available through the following :

- Boundless ongoing political support which was not available for the past reform experiences.

- The availability of effective and efficient leadership element

- A clear vision that controls the reform strategy and its plans.

- Firm belief that development and modernization are an ongoing process and should be carried out gradually instead of an overnight method provided a continuous momentum.

- Development process is a community work project and so participation should be made by community, businessmen, thinkers, and accountants along with the government officials.

- Reform will not be confined to large taxpayers; but it will exceed to all taxpayers, hence any success of LTC will be generalized to the medium and small taxpayers who will be dealt with by financial accounting agencies after large taxpayers have independently been dealt with by administrative, technical, and financial agency.

- This initiative will be followed by plans to improve and develop methods of dealing with medium and small taxpayers along with providing the suitable financial resources for this development.

- Adopting simplified regulations for dealing with the small taxpayers, which reduce administrative contact and simplify tax obligations. These regulations should be enacted in cooperation with the representatives of those taxpayers along with the establishment of specialized district offices to deal with them. These district offices are to benefit from all the techniques applied and tried in the LTC and made a success.

- To continue in raising the level of tax awareness and voluntary compliance.

- The ongoing study of simplifying the procedures and methods of treatment.

- Drawing more attention to the provisional agreements between the taxpayers and the tax authority.

Our objectives are big, our hopes are great and we are highly determined to achieve success.