Cairo prepares to tackle tax system

01 December 2003
The government is preparing to submit to the People's Assembly a 193-article bill which proposes changes to the country's unified tax law. The main aims of the draft legislation are to reduce income tax rates for lower to middle-income employees and expand corporate tax exemptions for the private sector. Drafted more than a year ago, the bill was showcased at the National Democratic Party (NDP) party conference in September and is now expected to be one of the first pieces of new legislation to be presented to the lower house when it begins a new session. The People's Assembly was due to begin the fourth session of its five-year term in mid-November, but the opening was delayed after President Mubarak was briefly taken ill during a speech at the opening session on 19 November.

One of the main aims of the draft law is to help offset the impact of local currency devaluation since January on poorer citizens. The most obvious impact of the free float for many Egyptians has been a sharp rise in the cost of imported goods. The NDP has also proposed reducing customs duties on imports of basic goods such as flour and sugar, but critics claim this would put excessive pressure on the government budget. Social subsidies account for nearly a third of total spending allocations, while the deficit has climbed to about 6.8 per cent of gross domestic product.

In an attempt to balance the equation, the NDP has also proposed introducing new austerity measures, including a 15 per cent tax on imports of non-essential goods such as luxury cars. These tax receipts would be channelled directly into relieving the public burden of subsidies.

As part of a broader masterplan to reform the country's tax system, the Finance Ministry in late September opened a one-stop shop for customs and tax expedition in Nasr City. The Model Customs & Tax Centre acts as an advice centre and collection point for taxpayers, as well as streamlining the process of clearing goods through customs. The project was part-financed by the US Agency for International Development, which also contributed $10.5 million worth of equipment for the centre.

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