CAIRO: Egypt’s government collected LE 169.7 billion in taxes for fiscal year 2010/11, a 15.6 percent increase over the previous year, Finance Minister Samir Radwan said Tuesday.
Radwan pointed out that the increase in tax revenues, which could mitigate the impact of the revolution on the economy, came up about LE 3.738 billion above the target, which was set at LE 165.993 billion, Egynews.net reported.
Despite the effects an increase on taxes may have on business during this turbulent period in the country’s economy, Ahmed El-Emam, owner of Tour Egypt, said that it might be the country’s only way out.
“Given the way the country’s rolling over the past weeks, tax raises may be the solution because cutting spending and cutting wages is not an option right now,” said El-Emam. “We can’t turn to taxing wages or cutting salaries, it would create more discontent during this time where people are already protesting all over the country.”
According to the breakdown of the tax revenues, LE 25.628 billion came from a tax on capital companies, LE 4.774 billion from commercial and industrial tariffs, LE 11.683 billion from a tax on salaries, LE 7.237 billion from stamp taxes, and LE 300 million from taxes on private businesses.
El-Emam, however, warns that while increasing taxes now is needed, the effects of the increase might backfire.
“Increasing taxes for business is like surgery, you have to do it, but you don’t know if you’re going to come out of it safe because it might bring down business and it will result in some businesses evading taxes,” he said.
“More effective taxes would be on things like cigarettes, but I’m doubtful that putting pressure on businesses during this time will help stimulate the economy; as a business owner, I will pay these taxes, but I might have to cut employees as a result, so that could actually be seen as hurting the economy.”
At the conference, Radwan also said during the first half of fiscal year 2010/11, profit from the Suez Canal and the private sector of petroleum saw an increase, along with a rise in the demand of consumer goods, which also helped boost growth.
Radwan said that the government managed to collect LE 57.228 billion in taxes from sovereign entities including oil, Suez Canal revenues, as well as government bills and bonds.
He added that this year’s fiscal policy shows that the government plans to focus on “achieving social justice through the equitable distribution of tax burdens among all citizens.”
This policy can be seen by the new segment structure of income taxes that imposes a 25 percent tax on each individual or company who make more than LE 10 million a year, Radwan added.
The government plans to spend the new tax on enhancing public services and “developing new programs of social justice.”
According to EL-Emam, however, if these new taxes do not bring out change and more employment, they could actually hinder the country’s economic and social development during this transition phase.
“If this increase in taxes does not translate into more employment, it would just be a cover up that would alleviate the situation temporarily,” he said. “Later, however, it will bring about more chaos and public discontent.”