(Photo from Centre for International Governance Innovation website)
Egypt’s interim government has opted not to increase taxes during the transitional period in order to better suit its expansionary economic policies, Minister of Finance Ahmed Galal said on Sunday.
After revitalising the economy, a different tax system will be vital for the government to generate resources and trim the budget deficit “in order to benefit both citizens and investors,” Galal added.
These statements were made during the closing session of the Community Dialogue Conference on Taxes, organised by the Egypt Tax Society.
The minister said that complaints about high taxes are “inappropriate” as the percentage of Egypt’s tax revenues as contribution to GDP is “low” compared to other countries.
The Egyptian Tax Authority expected to collect between EGP 20-25bn through implementing Presidential Decree 163/2013, which allows reconciliation between the authority and taxpayers.
Tax disputes awaiting court verdicts number approximately 20,000 cases going back to 2003, with the dispute amounts totaling EGP 40bn, read a statement from Ministry of Finance.
Mamdouh Omar, head of the Tax Authority, said that implementing this decision would “restore the trust between the authority and taxpayers, contribute to reducing tax disputes and increase the resources of public treasury”.
With regards to the Value-Added Tax system (VAT), Galal revealed that it will bring resources to the government, answering opponents’ criticisms by saying that the time will never be suitable to impose a new tax.
Galal denied that the VAT system will lead to increasing the prices of commodities in the markets, adding that it will be stable if the tax price is balanced.
“The VAT system strikes a balance between achieving social justice and generating resources,” Galal said.
The government is working on preparing the VAT law in cooperation with the International Monetary Fund (IMF), Galal said, adding that it will be presented to public for discussion after it is finalised.
Tax revenues reached EGP 80.3bn in the first six months of the current fiscal year, the Tax Authority said. Income tax revenue amounted to EGP 51.1bn and sales tax was totaled EGP 29.2bn between 1 July and 10 December.
This revenue indicates a 19% (EGP 1bn) increase compared to the corresponding period last year, during which tax revenue in the Central Bank of Egypt amounted to EGP 49.81bn.
The Ministry of Finance is considering establishing a Supreme Council of Taxes; however, Galal didn’t mention its intended function.
Galal also discussed in the conference a restructuring of the current wage system, which he called “illogical” as while fixed salaries form only 20% of the worker’s income, an overwhelming 80% comes variable as bonuses and incentives.
