By Mohamed Ayyad
Egypt’s Finance Minister, Mumtaz Al-Saeed, estimated that as a result of proposed tax reforms, the government will reap EGP 20bn in revenues by the end of the current fiscal year (2012/2013).
The government has recently increased taxes on a number of products while lifting energy subsidies for a number of factories throughout Egypt. However, most of the proposed amendments to Egypt’s tax code have recently been frozen, with President Morsy calling for a national dialogue regarding their implementation.
In their first meeting after the referendum, the Cabinet’s economic ministers warned that Egypt’s financial crisis was “very critical” and that it “cannot be allowed to continue.” Cabinet spokesperson Alaa Al-Hadidi said that unfreezing and implementing the recent amendments to Egypt’s tax code had become a necessity, and that it has become a requirement for all Egyptians, except the poor, to equally share and bear the burden of their implementation. He added that no government programme, economic or social, would be proposed that did not consider Egypt’s poor and take into account the government’s desire to promote social justice.
“The slow pace which the government has been implementing its economic reform programme may lead to a liquidity crisis. This could force the government to lower wages, salaries and potentially lay off employees,” Al-Saeed added.
Al-Saeed stated that the government’s need for external funding will amount to EGP 14.5bn by the beginning of the 2013-2014 fiscal year.
He added that the government was working to increase its revenues by raising taxes on 21 new products, such as alcohol and cigarettes. This would also include an increase in duty stamps, however, Al-Saeed added that this would have no effect on the price of electricity, water or gas.
Al-Saeed added that after recent meetings with the Federation of Industries, Investors Union, and the Egyptian Chambers of Commerce, he had not come across any serious opposition to any of these measures, and that businessmen were aware that proposed tax hikes were necessary to help revive Egypt’s lagging economy.
During a recent meeting with investors, Al Saeed stated that there is no other plausible alternative to addressing Egypt’s economic needs, other than raising taxes.
He asked investors to support the government during this difficult period and realise the seriousness of Egypt’s current situation, adding that he would consider measures to exempt capital goods from recent tax hikes in an attempt to spur production of goods.