The Ministry of Finance rejected a Ministry of Tourism request to calculate real estate tax for Cairo and Alexandria hotels according to substitutability value, according to a Ministry of Tourism official.
The official said that the Ministry of Finance will apply real estate tax on hotels in all tourist areas according to the market value starting from July 2014. However, there is disagreement on the criteria used for Cairo and Alexandria hotels.
Greater Cairo has 30,000 rooms, while Alexandria has 3,500, according to the ministry.
“It was agreed that only building areas would be calculated, out of the total area of the project in order to determine estate tax for hotels and resorts overlooking beaches,” according to the official.
The official added that hotel buildings in Cairo and Alexandria make up for all lands and that a large percentage of these hotels are historical.
The official estimates the estate tax from tourism sector to range between EGP 1bn and 1.2bn annually, hoping it would be postponed until recovery, at least by the end of this year.
According to the official, the ministry will demand excluding the historical hotels in all areas from tax according to their market value.
“I am not against taxes since the government has the right to impose them on all economic activities. However, this depends on tax justice,” said Soha El-Torgoman, Egyptian Chamber of Hotels member. “The sector is subject to more than 30 types of fees and taxes under very difficult circumstances.”
El-Torgoman believes the sector is burdened with a lot of financial commitments and cannot develop under these burdens.
Elhamy El-Zayat, Head of the Egyptian Federation of Chambers of Tourism, estimated that estate tax imposed on Cairo historical hotels will be raised by not less than 200%. El-Zayat added that the Marriot Hotel overlooks the Nile, and will end up paying EGP 6m, instead of EGP 600,000.
According to El-Zayat, the state has to support the sector not hamper it. “It is said that the sector is recovering, but is EGP 7.5bn income, by the end of last year, instead of EGP 12.5bn in 2010 considered a recovery? The comparison reveals a huge income drop.”