CAIRO: Minister of Finance Youssef Boutros-Ghali announced that the government has earmarked LE 1 billion for non-performing loans of small and medium sized businesses.
Speaking at a meeting of the American Chamber of Commerce in Egypt, Boutros-Ghali says that his ministry, in coordination with the central bank and the Ministry of Trade and Industry, are in the process of identifying loans in the range of LE 1 million each to companies which have been unable to meet their debt service and interest obligations.
These loans have been outstanding for years and are neglected by banks due to their relatively small size. The government has dedicated LE 1 billion to address these loans and further funds may be allocated for this purpose in the future.
Boutros-Ghali also plans to substantially reduce property taxes. The minister described the current property tax rate of 46 percent as ludicrous and is currently working on draft legislation to reduce the rate to 10 percent.
Social security was added to the Minister of Finance s portfolio in the latest cabinet reshuffle in December. Since 1986, benefits paid from social security funds at a faster rate than contribution. As a result, the social security system is increasingly under-funded and 73 percent of benefit payments are currently made from the national treasury.
The current social security system, Boutros-Ghali explains, is also structured in such a way that some people reach the pension age but are not eligible to receive benefits.
Plans are therefore underway to improve the financial condition of the pension funds and to reform the social security system so that all citizens who reach retirement age are eligible for pension benefits.
Boutros-Ghali adds that the pension funds will benefit from being under the management of the Ministry of Finance as a result of the latter s ability to draw on substantial borrowing and its general capacity to manage financial assets.
Meanwhile, businesses, the accounting profession and the tax authority are preparing for the implementation of the new tax law. The new law, which was passed by parliament last year, substantially reduces taxes and simplifies the related rules.
In addition, the law shifts the burden of reporting from the government to businesses and auditors. Companies must now file a tax statement, together with a declaration of accuracy from an auditor, and random samples are selected for scrutiny by the tax authority.
Many auditors, concerned of their liability in the event of fraud, have protested the requirement of a declaration. I cannot audit every single tax return; you have to help me, says Boutros-Ghali in response to complaints from accountants.
The declaration and the change in the tax system are part of the transformation of the relationship between the government and the private sector. Boutros-Ghali explains that the government, through its economic reform program, is deliberately preventing itself from infringing on the sphere of business, adding that the country has passed a few months ago the point of no return in this regard.
The future of the economy is therefore increasingly dependent on the private sector. We accept this risk, says Boutros-Ghali. We accept to entrust in your hands the future of the country.