CAIRO: The Federation of Egyptian Industries (FEI) will hold an urgent meeting to discuss government’s decision to impose a 5 percent tax on persons with annual incomes of more than 1 million EGP ($142,000,) the head of FEI Mohamed el-Sweedy announced in a statement released Thursday.
In an attempt to cover a major budget deficit, the interim government approved a proposal aimed to amend the Income Tax Law to include a 5 percent temporary tax on those who earn more than 1 million EGP annually. The government plans to apply the tax starting next year.
Sweedy added that FEI will announce its final decision concerning the tax after this meeting, denying reports that it had rejected it.
Since the resignation of former President Hosni Mubarak in the wake of the January 25 Revolution in 2011, Egypt has been suffering dramatic economic troubles registering a budget deficit of over 240 billion EGP during the previous fiscal year (2012/2013.)
Egypt’s budget deficit is expected to range between 340 billion-350 billion EGP during the coming fiscal year (2014/15), which is worth 14.5 percent of the country’s gross domestic product, if economic reform procedures are not adopted, Minister of Finance Hany Kadry said in a Cabinet meeting last month.
Kadry reduced the expected annual revenue from the 5 percent-tax to range between 2 billion to 3 billion EGP, down from 3.5 billion EGP, according to a statement released late Wednesday.
According to the Cabinet statement, the revenues would finance public service projects in education, health, agriculture, housing, and infrastructure nationwide. The Ministry of Finance, in collaboration with Ministry of Planning and International Cooperation, will determine these projects.
The tax was first proposed by a number of businessmen to the former Prime Minister Hazem al-Beblawy before he resigned to provide financial resources amid efforts to fill the growing budget deficit.
Welcoming the new tax, Ahmed Heikal, the Chairman of Citadel Capital, described government’s decision to impose 5 percent tax on high-income earners as “a 100 percent good,” Youm7 reported Thursday.
Financial analyst at HC Omar Radwan also welcomed the new tax, expressing hope that its revenues could help provide liquidity to cover the budget deficit.
Radwan, however, urged the government to take into account maintaining the cadres who could resort to immigration to the neighboring Gulf States while planning to impose additional taxes.
“Applying the value added tax (VAT) rather than the current sales tax will help achieve tax justice, and deemed a step towards stable social and political positions, and consequently better investment environment,” Radwan told The Cairo Post.
“If the government managed to promote tax justice, it will attract a great number of tax evaders and non-formal economy, also known as gray economy, to pay tax dues,” he added.