Egypt cancels bank loan loss provisions tax one month after imposing it

The ministry of finance has cancelled a tax on bank loan loss provisions imposed last month after the Shura Council amended banking regulations. The upper house of Egypt's parliament, currently endowed with legislative powers, approved last month amendments on banking regulations proposed by an MP from the Muslim Brotherhood's Freedom and Justice Party (FJP). The amendments cancelled the tax deductibility hitherto accorded to 80 per cent of loan loss provisions held by Egyptian banks. Loan loss provisions are an expense set aside by banks as an allowance for bad loans. A bylaw, published on Wednesday, cancelled the tax without sending back the law to the Shura Council, avoiding a politically embarrassing situation. The bylaw considered loan loss provisions as costs to be deductible from net profits, which effectively means they will be exempted from income tax. The Shura Council's move, which was adopted without any discussion with the governor of Egypt’s central bank or representatives of Egypt's banking sector, was met by anger by banking officials. "I learned about the law on loan loss provisions from newspapers," the central bank’s governor, Hisham Ramez, commented at the time. "The lack of coordination between the bank and the finance ministry explains how the law was issued without me being informed," he added. From : Ahram Online