Across Africa, countries are embracing digital technologies to modernise payroll tax systems and calculation methods, aiming to enhance transparency, streamline compliance, and bolster revenue collection. This shift is pivotal in formalising economies, particularly in regions that are utilising innovation to mature their overall tax and payroll reporting.
Recently, Kenya announced a significant policy shift by requiring all employers to automatically apply eligible tax reliefs and exemptions when calculating employees' pay-as-you-earn (PAYE).
On 2 June, Egypt launched a unified digital payroll tax calculation system. It marks a significant milestone in the nation’s ongoing digital transformation of its tax infrastructure, with implications for global payroll professionals.
Egypt’s Unified Payroll Tax System
ETax, the technological arm of the Egyptian Tax Authority (ETA), developed this new system in cooperation with SAP and Egypt’s Ministry of Finance. This initiative aims to standardise payroll tax computations, enhance transparency for employees, and streamline compliance for both employers and employees.
Key features include a unified, documented model to calculate payroll taxes, reducing inconsistencies and minimising reliance on manual estimations. The platform operates on advanced technological infrastructure to ensure high standards of data protection, safeguarding personal information.
Perhaps most importantly, this new initiative provides employees with new features and capabilities which had not existed before in providing greater visibility to their payroll calculations and pay. Accessible via the ETA’s website, the portal allows employees to register using their national ID numbers to view detailed breakdowns of their monthly salaries, including total income, withheld taxes, and insurance contributions. Employees can also print official, certified payslips for use in banking and governmental transactions.
Call to Action for Employers, Payroll Providers
With employees gaining full visibility of their payroll (which should be the default practice in general), including calculations and payslips, employers need to review their payroll processes and practices. Employers may need to invest in training for HR, payroll, and employees to effectively utilise the new system and stay updated with any changes or updates. Payroll teams also need to think about how to handle new questions which may start to come in, along with developing new FAQs or even deploying a chatbot.
Payroll providers should ensure their payroll engines adopt the new calculation rules to ensure compliant reporting to the unified payroll tax system. Proper end-to-end testing, engagement with their customers and other stakeholders, including communication plans, is strongly advised.
Closing Thoughts
Overall, Egypt’s unified digital payroll tax system represents a significant step towards modernising the country’s tax infrastructure in line with a broader trend in the region. This initiative is increasing transparency for employees regarding how their payroll and payslips are calculated. While it introduces new responsibilities for employers, it also offers opportunities for increased efficiency, transparency, change management, and communication approaches, along with compliance and new controls in payroll management.
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Max van der Klis-Busink, MCIPP, RPP, is the Owner of Passion For Payroll and Vice President of Global Strategy on PayrollOrg’s Board of Directors.
