On June 16, the Egyptian Parliament approved Protocol No. (2) attached to the agreement between Egypt and the UAE to avoid double taxation, granting one of the wealthiest sovereign wealth funds in the world, “Abu Dhabi Developmental Holding Company,” broad tax exemptions on its investments within Egypt, in exchange for similar privileges that the “Egyptian Sovereign Fund” is supposed to receive in the UAE.
This decision comes at a time when Egypt is facing one of its worst economic crises, with a growing budget deficit and unprecedented pressures from the International Monetary Fund to expand tax revenues and reduce exemptions that cost the state billions of pounds annually. While the government promotes the agreement as strengthening the investment partnership between the two countries, observers raise questions about the balance of this understanding, especially given Egypt’s weak investment presence in the UAE and the already low tax rates there. This shift in favor of the Emirati side deepens concerns that Egypt could gradually become a tax haven for foreign capital at the expense of the local economy, which is struggling under the weight of structural crises and rising poverty levels.
The Lost Balance: Is Egypt Really Benefiting?
The official language describes the new protocol as a “balanced” agreement that enhances economic cooperation between Egypt and the UAE. However, a closer look reveals a clear gap in the balance of interests between the two parties. In reality, the UAE is already one of the countries with the most lenient tax systems, as it does not impose taxes on companies in most sectors, with limited exceptions recently applied to the profits of large companies, but at a rate much lower than the global average. This means that the privileges granted to the Egyptian Sovereign Fund within the UAE, as part of the agreement, actually carry limited economic value compared to what Egypt will lose in tax revenue from Abu Dhabi Holding’s investments.
The matter does not end here. Investment data reveals a significant disparity in the size of reciprocal investments. UAE investments in Egypt are massive and growing, especially in sectors like real estate, energy, logistics, and infrastructure, while Egyptian investment in the UAE remains limited, focused on small and medium-sized enterprises, and does not include companies or sovereign funds as large or influential as “Abu Dhabi Holding.”
This imbalance undermines one of the key conditions of balance that should exist in such agreements, turning tax exemptions into a one-sided advantage for the Emirati side, at a time when Egypt desperately needs every source of income to compensate for rising foreign currency losses and meet its internal and external obligations.
In this context, Talaat Khalil, Coordinator of the Civil Movement and a member of the Presidential Council of the Conservative Party, warns of the serious repercussions of this decision, stressing that it goes far beyond the concept of conventional double taxation agreements. He explained in a statement to Zawia3, “There should be a clear distinction between the double taxation agreement signed with the UAE in 2020 and what is happening now. The agreement aims to prevent the tax from being imposed on the same project in both countries; what is paid in one country is not paid in the other, which is acceptable. But the recent decision is not about avoiding double taxation; it is a complete and total exemption, which is entirely different and suspicious.”
Khalil, the Civil Movement coordinator, added: “The real danger lies in the manipulation of classifying Abu Dhabi Holding as a governmental entity, merely because it is owned by the Abu Dhabi Sovereign Fund, which has partnerships with the Egyptian Sovereign Fund. This classification was used as a pretext to grant the company full exemption from income taxes, capital gains taxes, and dividend taxes, even though it is actually making huge profits from its diverse investments in Egypt. Now, it is being exempted from any obligation toward the state on these profits, at a time when the public treasury is suffering from a severe resource crisis.”
Khalil emphasizes that this decision creates an unfair investment environment, stating: “This exemption represents a serious flaw in the market and blatantly discriminates against the Egyptian investor, who remains obligated to pay all due taxes. How can we talk about encouraging local investment while granting exceptional privileges to foreign entities at its expense? This undermines the principle of equal opportunity.” He underscores the sovereignty aspect of the issue, saying: “What is happening is strange and worrying, and it comes as part of a larger context of opening all doors for the UAE to dangerously infiltrate the Egyptian economy under the guise of investment. Taxes are not just money; they are one of the most important resources of the state’s sovereignty. Squandering this right is a waste of the state’s resources and a violation of its economic sovereignty, which cannot be accepted.”
Abu Dhabi Holding, founded in 2018, is considered one of the largest and wealthiest sovereign wealth funds in the Middle East, with assets estimated in the tens of billions of dollars, and investments spread across strategic sectors including energy, infrastructure, food, and pharmaceuticals. It is increasingly expanding its presence in the Egyptian market through massive acquisition deals in multiple fields. According to the agreement’s texts, these exemptions cover company profits and investment returns in several sectors in Egypt, sectors that have long been considered a cornerstone for increasing state revenues, especially amid the currency shortage crisis and escalating financial pressures faced by the government.
The Danger of Tax Exemptions
While the government is rapidly granting broad tax exemptions to Abu Dhabi Holding and other Gulf entities, Egypt is facing increasing pressure from the International Monetary Fund (IMF) to broaden the tax base and improve tax collection efficiency, as a necessary step to address the fiscal deficit and achieve economic stability. In its latest review of Egypt’s economic performance, the IMF explicitly recommended the need to reduce “excessive tax exemptions” that deprive the public treasury of vital resources, especially amid rising inflation rates and increasing foreign and domestic debts. The IMF considered that relying on tax-exempt investments could exacerbate financial imbalances, rather than alleviating them, deepening the gap between government revenues and spending.
In this context, Dr. Karim Al-Omda, Professor of Political Economy, argues that “Double taxation avoidance agreements are internationally recognized economic tools designed to create an attractive investment climate.” He said in a statement to Zawia3, “The protocol signed with the Abu Dhabi Fund is an annex complementing an existing agreement, based on the principle of reciprocity, where Egypt provides facilities to the Emirati fund in exchange for the Egyptian Sovereign Fund receiving the same benefits in the UAE, which strengthens mutual economic relations.”
Al-Omda adds that “The main goal of these facilities is to encourage and stimulate investment, especially since Egypt faces a real challenge in attracting foreign direct investment. Therefore, offering tax incentives to major funds like Abu Dhabi Fund, which played a pivotal role in the Ras Al-Hikma deal and acquired stakes in companies listed on the Egyptian Stock Exchange, is a necessary step to increase the investment flows that the economy desperately needs.”
In response to the criticisms directed at the decision, the political economy professor says in his conversation with us: “Some may see these exemptions as a concession of tax revenue, but we must look at the broader picture. Without these incentives, such investments might not come at all. We haven’t lost taxes on a non-existent investment; rather, we gained a new investment that entered the Egyptian market. The real benefit lies in the inflow of this money into the market, not in the theoretical taxes that could have been collected.”
He continues, “This step cannot be separated from the general investment climate and the strong political relations between the two countries. Given the current economic conditions and the economy’s dire need for hard currency, attracting investments of this magnitude becomes a top priority. Investments that come through strong political and economic channels are different from investment in a natural environment where investors may hesitate.” He concludes: “Criticizing such decisions at this time could send negative signals to potential investors. We must support measures that aim to enhance confidence in the economy and attract more capital. The alternative is the continued scarcity of foreign direct investments.”
Systematic Support for Gulf Capital
The tax exemptions granted to Abu Dhabi Holding appear to be part of a broader Egyptian economic policy that prioritizes Gulf investments, offering them wide-ranging facilities, even at the expense of internal balances and the country’s growing financial needs. According to observers, this approach cannot be separated from the political and regional context, as the UAE, along with Saudi Arabia and Qatar, has played a pivotal role in supporting the Egyptian economy for years, whether through deposits in the central bank, massive investment deals, or direct aid.
Since the onset of successive economic crises in Egypt starting in 2016, Cairo’s reliance on Gulf financing has increased, creating a blend between political and diplomatic relations on one hand, and economic and investment interests on the other. This is clearly reflected in the preferential policies granted to Gulf companies and funds, especially Emirati ones.
Abu Dhabi Holding, as a strategic investment arm of the UAE, has benefited from this trend, expanding its influence within Egypt through acquisition deals in vital sectors such as food, transport, infrastructure, and industry. With every new deal, questions arise about transparency, the true valuation of Egyptian assets, and the extent to which the national economy benefits from these transactions, beyond the official figures that promote investment successes which may not directly reflect the lives of citizens.
Zahdi El-Shami, an economist and Chairman of the Board of Trustees of the Popular Socialist Alliance Party, argues that the tax exemptions granted by the Egyptian government to Abu Dhabi Holding, as an investment arm of the Abu Dhabi Sovereign Fund, clearly reveal dangerous imbalances in economic policy. He explains that taxes and levies burden the poor and low-income individuals, while major foreign investments are exempt from any obligations to the state. El-Shami asserts that these arrangements make Emirati capital “profitable in every direction,” benefiting from the decline in the value of the Egyptian pound, the undervaluation of assets, and then receiving comprehensive tax exemptions on top of that.
In a conversation with Zawia3, El-Shami points out that the devaluation of the Egyptian pound, which has reached about 50 EGP to the dollar in some official transactions, represents an additional gain for foreign investors. This is especially true given the undervaluation of government assets that are being sold for less than their actual worth, which magnifies the profits of Gulf funds, especially Abu Dhabi Holding. At the same time, the Egyptian economy is deprived of revenues that could have been generated from taxes on these massive investments, deepening the financial crisis the country is facing.
El-Shami warns that these exemptions are not limited to Gulf investors, but also include Egyptian sovereign entities that invest in the domestic market without paying their full taxes, raising questions about who ultimately bears the tax burden. According to El-Shami, the result is clear: the poor and the middle class are the ones who pay the price, amidst a worsening living crisis, a decline in public services, and an unprecedented rise in the cost of living.
Amidst this imbalanced equation, El-Shami notes that the government continues to impose additional burdens on citizens, through decisions such as doubling residential and commercial rents under the guise of increasing the property tax revenue by around 30 billion EGP. He believes these policies, which are approved through a parliamentary body he describes as “almost appointed,” reflect a clear bias in favor of major investors and foreigners, while the ordinary citizen is crushed under the weight of increasing taxes, prices, and levies.
Economic and Social Implications… Who Pays the Price?
While major investment entities like Abu Dhabi Holding enjoy generous tax exemptions within the Egyptian market, the ordinary citizen finds themselves trapped by rising prices, the depreciation of the pound, and a lack of sufficient public services, amidst a severe living crisis that cannot be separated from the economic policies that prioritize foreign investors at the expense of the most vulnerable groups in society.
The tax revenue in any country is a key pillar for funding the public budget and ensuring continued spending on essential services such as education, health, infrastructure, and social protection. In the case of Egypt, taxes have become even more crucial as a source of funding with rising external debts, declining state revenues due to the currency crisis, and economic slowdown.
Exempting large companies and funds from taxes, especially in vital sectors that generate huge profits, means depriving the public treasury of resources that could be used to reduce the budget deficit, improve public services, or support the most affected groups in the harsh economic conditions.
In contrast, the government increasingly relies on indirect taxes, such as value-added tax and various fees that citizens bear in all aspects of their daily lives, from electricity and water bills to the prices of goods and services. This increases the living burden on the poor and middle classes. According to observers, these policies deepen the class gap, expand the poverty circle, and create a sense of social frustration that could have long-term political repercussions, especially in the absence of clear indicators of economic improvement or a fair distribution of wealth and investments.
In this context, tax exemptions for foreign capital, led by Gulf funds, seem to be part of an imbalanced equation where the ordinary citizen bears the cost of supporting investments, while the profits of major entities increase in an already overburdened economic environment. This raises fundamental questions about the future of social justice and the sustainability of this economic model.
