President Mohamed Morsi issued a presidential decree on Sunday giving the go ahead for an increase in customs tariffs on a variety of imported luxury goods. The decree raises customs duties from five per cent to between 10 and 40 per cent on almost 100 items ranging from shrimps to flowers, watches, sunglasses, nuts and plastic cards. The decree includes fruit like mangos, oranges, pineapples, strawberries, dates and apples. Dog and cat food, caviar, cola and chewing gum will also be affected. However, the decree also stipulates a reduction in the tariffs on vehicles using electricity or natural gas in order to encourage their importation and help rationalise fuel consumption. The tariff increases were first proposed in February in a draft law by the cabinet. The aim is to help reduce Egypt's total imports bill, which according to Central Bank of Egypt figures stood at $58.6 billion in 2012. Kamel Al-Naggar, chairman of the tariffs committee at the Alexandria Businessmen's Association, told Al-Ahram Weekly that he supported the decision because it would help increase government revenues from customs and help overcome the country's gaping budget deficit. The news tariffs are expected to bring in some LE1.3 billion to government coffers. The move should also help to rationalise hard currency spending. Egypt's hard currency reserves have dwindled to $13 billion, down from $36 billion in January 2011. According to Al-Naggar, the decision conformed with Egypt's commitments to the World Trade Organisation, which allow Egypt to keep customs duties as high as 40 per cent. Al-Naggar praised the decree since it would help encourage imports of vehicles using electricity and natural gas and should help curb the current fuel shortages. On the downside, the increases will negatively impact the prices of the products in question. Ahmed Al-Wakeel, head of the Egyptian Federation of Chambers of Commerce, said on television that as the decision would lead to increases in the prices of the items concerned, this would lead to greater demand for their local counterparts, leading to higher inflation. However, Al-Naggar said that the tariff amendments were unlikely to affect the worse off, since they did not buy the items targeted. “I don't think it will be a problem for the better off to pay higher prices for these products,” Al-Naggar said. Nevertheless, Al-Wakeel was worried about the possibility of smuggling. “Higher customs duties will mean more smuggling of these products onto local markets,” he warned, though Al-Naggar said that this could be contained through stricter security measures.
