Egyptian Tax Rises Aim at Social Justice

Prime Minister Hisham Qandil criticised what he described as the negative role of private media in portraying recently-announced tax hikes at a press conference. Egyptian President Mohamed Morsi, who holds legislative authority, announced on Sunday sweeping increases in sales taxes and stamp duties on a wide range of consumer goods and services, and amended Egypt's income and property tax laws.

Qandil stated that the new tax hikes on various commodities were implemented to fulfill the main demand of the revolution, namely social justice. The prime minister pinpointed the implementation of high-income taxes as a step forward in progressive taxation. The prime minister asserted that the new law puts heavier tax burdens on high-income segments of society, and puts in place a social safety net for the underprivileged.

Most of the taxes introduced were already ratified in 2008, such as the property tax law; the government in most cases has only modified the incomes at which taxes apply. The highest income was modified so that those with annual incomes above LE1 million (instead of LE10 million) are taxed at a 25 per cent rate, Qandil stated. The tax law will increase the prices of steel, cement, soft drinks and cigarettes and beer.

Qandil rejected criticisms by analysts and opposition figures that the new legislation is one of the International Monetary Fund (IMF)’s conditionalities to approve the proposed $4.8 billion loan that the Egyptian government asked recently to postpone in light of the current political crisis.

The prime minister also stressed that the tax law is part of the government’s "economic reform" plan aimed at overcoming the current economic obstacles the country is facing and implementing social justice. The government announced that the new economic measures included in the new tax law will relieve the country's liquidity crunch, reduce budget deficits and ease currency depreciation risks.

Egyptian President Mohamed Morsi suspended the implementation of tax increases on Monday shortly after they were announced, in reaction to the negative public outcry that followed. Prime Minister Qandil affirmed that the property tax law will be implemented by July 2013 without any delay. The rest of the tax increases will only be introduced following national dialogue, after Morsi's statements that he will not allow citizens to take on extra burdens without their consent. Qandil added that the new tax law will only be implemented only after a degree of public acceptance is reached.