Page 17 - issue 29 En

ELITE ISSUE 29, MARCH 2021

• Second, targeting temporary measures and mechanisms The Minister replied that the state knew when these
that are flexible and easy to exit after the crisis ends. agreements were signed that the revenues from customs
• Third: Selecting the most affected and deserved societal tax would decrease, which in turn would lead to a
groups and economic sectors for support. decrease in revenues. They were based on liberal
• Fourth: Enhancing transparency and disclosure of the academic arguments that lowering tariffs had greater
measures and procedures used and who are entitled to economic effectiveness. Growth will rise, imports may
them. To achieve these pillars, the government has studied grow or consumers' needs may be met. The Minister
the potential impact on the Egyptian economy to reach the added that there is a difference between theoretical
financial space that can be allocated to face the crisis in the arguments and tangible reality.
short term. Several measures have been announced and The Minister stated that even so those agreements were
implemented targeting the groups and first sectors, such as signed, but, currently no one is benefiting from them, so
helping irregular employment, canceling real estate taxes these agreements must be reviewed periodically by the
for a year on the tourism sector, allocating 2 billion pounds specialized committees.
from the treasury in the form of an interest free loan to the Q: Egypt lost 14 billion pounds from tourism income
civil aviation sector and many other decisions. and reduced the value-added tax by 15%, so why not to
The total government expenditures to confront the crisis reduce this tax for a specific period to enhance
reached nearly 100 billion pounds, equivalent to 2% of the consumption or domestic tourism, create job
GDP. The state's overall budget has also been updated opportunities, and save the packages that the ministry
according to the estimates of the World Economic Outlook spent for this sector, knowing that countries such as
issued by the International Monetary Fund in April 2020, Britain And Germany and Austria have reduced those
the reports of the Ministry of Planning and the Central
Bank of Egypt. The minister also indicated that these rates to 5% from 20% and 17%?
procedures were carried out in a transparent manner with The Minister answered that the situation of these
the Egyptian parliament, investment banks and countries differs from Egypt, because - if their revenues
international institutions. decrease - it is easy for them to borrow as their interest
According to the minister's statements, Egypt surpassed rate is zero. But the interests in Egypt are equal to 15%.
the first year of the crisis with a growth rate of 3.6%, Moreover, Britain has canceled the Vat Refund that was
which is high compared to the rest of the countries, as only offered. Also, abolishing the value-added tax on the
1/15 of the countries achieved a positive growth rate. It tourism sector is difficult, as other sectors that have been
also maintained all its sovereign ratings, and established affected by the crisis will demand the generalization of
several initiatives such as offering green bonds to the that decision. In addition, the tax abolition will raise the
market and electronic invoices, making Egypt the first concerns of the international financial bodies from the
country in the Middle East to adopt these measures. He increase in the deficit and thus the debt. This is why
also added that the ministry is targeting in the 2021/2022 Egypt has implemented effective, safe and easy exit
budget a growth rate of about 2.8%, a total deficit of 7.8%, measures.
a primary surplus of about 0.6%, and a debt level of 88% Q: The value-added tax constitutes 51% of non-
of GDP. sovereign tax revenues, while income taxes constitute
The seminar was finalized with the questions of the only 34%. Why not reduce the value of the value-added
professors and faculty members. We will mention the most tax as it is a blind tax that does not differentiate between
prominent of them. the rich and the poor, and raise the value of income
Q: The wage growth rate has reached 8.7%. How did the taxes, to reduce inequality?
real wage growth rate evolve? The Minister explained that, in his opinion, the value-
The Minister explained that the real wage growth rate has added tax differentiates between the rich and the poor
decreased significantly due to previous periods of through consumption, as it is imposed on unnecessary
inflation. Then, he promised to improve that rate, products consumed by the richest individuals, and thus
especially due to the reduction of the number of employees the poor do not contribute significantly to that tax. Also,
from 6 million to 4.7 million. the ministry seeks to increase income tax by enhancing
Q: Customs taxes decreased by 8.8%, due to the free growth and corporate profitability and not by raising the
market agreements, so why not to withdraw from these tax brackets, as raising the tax bracket will reduce
agreements after 16 years signing them? investment, which raises unemployment.

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