Taxing the rich but not the capitalists: Direct taxation in Sisi’s Egypt (2014-2021)

Abstract

ABSTRACT How come authoritarian regimes target certain social constituencies with direct taxation more successfully than others? This article addresses the recent surge in Egypt’s property tax revenues since 2014, which has almost exclusively fallen on the shoulders of rich property-owners in urban areas. Conversely, similar efforts to collect capital gains taxes from investors in the stock market failed miserably during the same interval. What might explain such disparity between property-and capital-holders under Sisi’s rule? Invoking Albert Hirschman’s paradigm, I argue that rich property holders in urban areas could be pressed successfully for direct taxation because they lacked viable exit options given the immobile nature of their assets, the national scope of property taxes, underdeveloped financial system and the inflation-context. Even though they had a voice, it could be ignored with minimal political and economic repercussions for the ruling regime, given the lack of intermediate channels. Conversely, large and concentrated capital holders could utilize the more mobile nature of their assets to credibly threat exit, amid the regime’s desperate need for re-launching the economy. Moreover, they could voice their protest and coordinate collective economic action on sectoral or cross-sectoral basis without much need for intermediaries. Specific to Egypt, the contrast of both simultaneous processes of direct taxation might inform us of the class dynamics of the Sisi regime, which could adopt relatively progressive direct taxation in some areas like real-estate property despite the overwhelming regressive fiscal reforms while showing a terminally limited ability to effectively collect direct taxes on big capital holders.