Egypt's Morsi raises taxes then halts the rises within 1 day

[DJKeefy]

Egypt's Morsi raises sales and income taxes, approves property taxes.

Egyptian President Mohamed Morsi, who holds legislative authority, announced sweeping increases in sales taxes and stamp duties on a wide range of consumer goods and services on Sunday and amended Egypt's income and property tax laws.

Income tax brackets were also modified, and the highest bracket was changed so that annual incomes above LE1 million (instead of LE10 million) are taxed at a 25 per cent rate. The president also issued a law levying a 10 per cent tax on Initial Public Offerings (IPOs), company mergers and acquisitions.

The measures represent the implementation of an economic programme that Egypt has proposed to the International Monetary Fund (IMF) in order to be eligible for a $4.8 billion loan.

The measures are aimed at reducing public deficit through increasing state revenue.

Morsi has already reduced subsidies on butane gas and electricity as part of a government austerity programme.

Among other products, sales taxes were increased on steel, cement, soft drinks, beer and cigarettes.

Morsi also raised sales taxes on a variety of services, including mobile-phone services, air-conditioned transportation, and cleaning and security services, among others.

He also doubled stamp duties on bank facilities and loans. A new scheme for duties on advertising was also put in place, with the highest bracket standing at 25 per cent instead of the previous 15 per cent flat rate.

The new legislation also stiffens penalties for tax evasion.

As for the property tax law, the exemption level was raised from properties valued at LE500,000 to those worth LE2 million. This will become effective as of 1 July of next year. Single home owners are not exempted from the tax.

The law levies a 10 per cent tax on annual rent for properties with market values of LE2 million after deducting 30 per cent of this value for maintenance purposes.


The following is a brief summary of the new changes to Egypt's tax structure:

- Steel rebars used for construction will be subject to a 10 per cent sales tax.

- Taxes on alcoholic beer will be increased from 100 per cent (with a minimum of LE200 per 100 litres) to 200 per cent (with a minimum of LE400 per 100 litres).

- The single tax on cigarettes will be raised from LE1.35 to LE2 per pack for locally produced cigarettes and to LE2.50 for imported cigarettes.

- Taxes on shisha (water pipe) tobacco will be increased from 50 per cent to 150 per cent.

- Taxes on local and imported wines will be raised to 150 per cent from 100 per cent.

- Taxes on cooking oil will be set at 5 per cent of the sale value instead of set per-tonne levies.

- Taxes on mobile-phone calls will be increased from 15 to 18 per cent.

- New sales taxes will be levied on fertilisers, pesticides and soft drinks, among others.


Income taxes

Modifications to the income tax structure will also be implemented, effective Sunday. The new Egyptian income tax structure will be as follows:

First segment (LE5000 or less): Exempted

Second segment (LE5000 – LE30,000): 10 per cent

Third segment (LE30,000 – LE45,000): 15 per cent

Fourth segment (LE45,000 – LE1 million): 20 per cent

Fifth segment (LE1 million or more): 25 per cent

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Egypt president Morsi halts tax hikes, calls for dialogue

In a statement in the early hours of Monday, the Egyptian President suspends the implementation of tax increases announced Sunday afternoon.

Egypt President Mohamed Morsi has retracted his Sunday decisions to increase tax burdens on the Egyptian people, and ordered the government to carry out a "social dialogue" on the measures before implementation.

In a statement issued on his official Facebook page at around 2 am on Monday, Morsi said he had put on hold the measures of raising sales taxes on a wide range of consumer goods and services that were made public Sunday afternoon.

“[The President] does not accept that the Egyptian citizen carries any extra burdens without consent. His Excellency has decided to halt the [tax raising] decisions until the degree of public acceptance is made clear,” the statement read.

The measures represent the implementation of an economic programme that Egypt has proposed to the International Monetary Fund (IMF) in order to be eligible for a $4.8 billion loan. They are aimed at reducing public deficit through increasing state revenue.

Morsi has already reduced subsidies on butane gas and electricity as part of a government austerity programme.

Among other products, sales taxes were increased on steel, cement, soft drinks, beer and cigarettes as well as a variety of services, including mobile-phone services, air-conditioned transportation, and cleaning and security services.

Egypt has already secured a preliminary (staff-level) approval for the loan and the IMF board of directors is expected to approve the facility on 19 December.

The timing of the measures, less than a week before the 15 December scheduled referendum on the draft constitution, was seen as inappropriate by many observers given that the new taxes were expected to incur public anger.

For its part, the Muslim Brotherhood’s Freedom and Justice Party (FJP), from which Morsi hails, issued a statement Sunday evening denouncing the President’s decisions and demanding they be put on hold.

“[The party] calls on the head of the government [Prime Minister Hisham Qandil] to halt these decisions until they are submitted to the People’s Assembly after its formation,” the FJP said in a statement.

Sources:
Egypt's Morsi raises sales and income taxes, approves property taxes:
http://english.ahram.org.eg/News/60145.aspx

Egypt president Morsi halts tax hikes, calls for dialogue:
http://english.ahram.org.eg/News/60166.aspx

[Horus]

What an absolute shambles this man is making, he is becoming a bit of a joke, who in their right minds would announce such sweeping changes on a Sunday and repeal them several hours later?
Especially with the current unrest as a result of his previously ill considered actions.

Why had no "social dialogue on the measures” as quoted, not already taken place before this announcement was made? Surely his job and that of his aids was to have investigated the impact of any changes on the population in general, anything that impacts on the average Egyptian is going to be unpopular and create more protests so maybe that is why he has done this second ‘U’ turn on policy.

There is no doubt that the Egyptian people are going to have to face up to the poor fiscal situation their country and economy is in and like Greece there has to be a reckoning, world handouts come with strings attached and that is to cut out waste and to balance your budget. I can well understand adding high taxes to imported goods as that does not impact upon most poor Egyptians, it may make life more expensive to expats and tourists, but a high alcohol tax will not affect most Egyptians. Property taxes above a certain value should be levied as anyone able to build such properties should be able to afford the taxes that go with them. I would also put a tax on rentals above a certain level as they fall into the same category of only the more affluent being able to afford to do this.

Some of these measures will however impact upon tourism and that is up to the government to decide how if at all they wish to control or lessen those effects. What is certain is that they will need to raise taxes in order to comply with IMF and other lenders conditions for loans, it is not a bottomless pit and with the changes to the old order of things a lot of Egyptians are in for a lot of financial pain. To a large degree they were buffered against this reality by the massive aid handed out to them in their privileged position as the West’s number one ally in the region in supporting an Israeli status quo, but with the election of a MB Islamic government that support has shifted. So it unlikely that the West will be as interested in negating the burden of a large military structure that may at some time be used against it in support of more radical elements in the region such as Hamas.

The Arab Spring has brought the people of Egypt many things including a new found freedom to protest, but it has also brought hardship and turmoil and many may come to regret that they replaced the “devil they knew” with something even less palatable.

[LovelyLadyLux]

Talk about creating chaos. Wow.

I fully agree that an economic system and other systems needs to be put into place in Egypt whereby taxes/loans/interest rates etc etc etc can be known, transparent, regulated etc but this comes slowly over time with discussion, public input blah blah blah.

This is really a very sad outcome to the Arab Spring. Hopes where so high with so much optimism and now they've got a Buffoon in power who doesn't seem to have a clue how to lead. It is all a slippery slope and I'm thinking Egypt is sliding rapidly.

I also noted the tax on ALCOHOL - seems a funny tax to be adding in a country that predominantly does not/should not be drinking!