Egypt's cabinet approved on Wednesday a budget for the 2011/12 financial year that increases spending by a quarter as the government strives to help the poor after a popular uprising unseated the country's president. To help finance the increased spending, Egypt will introduce a 10 percent tax on capital gains and a 5 percentage point increase in the income tax levied on corporations and individually owned companies, the government said. The higher income tax will be applied to companies that earn 10 million pounds or more, a cabinet statement said. Finance Minister Samir Radwan said the government would also levy a new 10 percent tax on cigarettes. That levy and the capital gains tax will each generate about 1.1 billion Egyptian pounds (US$185 million). The budget forecasts expenditure increasing to 514.5 billion Egyptian pounds from 413.2 billion and revenue rising to 350.3 billion pounds from 285.8 billion, the statement said. That leaves a deficit equivalent to 10.95 percent of gross domestic product, up from an estimated 8.64 percent in the current financial year that ends on June 30, it added. "The situation demands a change in the economic path, to make it more just, to increase its ability to generate job opportunities for the poor, to increase their ability to produce and create income for an honorable living," the statement said. Radwan forecast that the economy will grow by 2.6 percent this year and by 3.2 percent in 2011/12. The government last month estimated 2011/12 growth at 3-4 percent. Anger at a growing gap between rich and poor in the country of 80 million people helped spark mass demonstrations that toppled President Hosni Mubarak in February. The government plans to increase subsidies on consumer goods by 26 percent to 22.4 billion pounds to make them more affordable for the population, Radwan told a news conference. Separate fuel subsidies for consumers will rise to 99 billion pounds, an increase of 31.3 billion pounds. At the same time, the government will exempt incomes of up to 12,000 pounds a year from income tax, up from 9,000 pounds previously. Radwan said he aimed for a minimum wage of 1,200 pounds within five years. (US$1=5.942 Egyptian Pound)
