The government has approved new sales tax increases to boost treasury revenues. The proposed law also includes escalating penalties on tax evasion to five years imprisonment and a doubling of the tax owed. The new increase would affect nearly all goods and services and is intended to rectify the existing taxes irregularities. The law drafted by the government stipulates a base increase of the sales tax to 11 per cent from the current 10 per cent. Some goods and services will have their taxes increased further. The communications sector is proposed to be taxed at 15 per cent, plus one piastre for every minute or SMS. Other items to be taxed at a higher rate include tobacco and alcohol. Taxes on steel will jump from eight to 11 per cent. Taxes on coffee beans, hydrophobic concrete, soda, non-alcoholic beer and cars are also expected to rise. The proposed law will exempt imported capital goods. The planned increase coincides with the International Monetary Funds' (IMF) technical team visit to discuss the government's economic plan which is a precursor to the $4.8 billion loan agreement. Cabinet spokeperson, Ambassador Ala Al-Hadidi, said an agreement was reached with IMF delegation on the main factors for achieving financial and economic stability, as well as increasing available resources to spend on social programmes. His statement followed a meeting between Prime Minister Hesham Qandil and the delegation, with the presence of ministers of finance and planning, according to the state information service. The vice president of the chambers of commerce union Mohamed El-Masry confirmed that “the issue is yet to be discussed within the chambers, it was understandable, however, that the government decided to raise taxes, especially in light of the high budget deficit. He continued, “they are trying to find resources to cut the deficit to be able to assume their responsibility and to extend spending on social programmes." The highly ranked official also mentioned an income tax increase. “A new category has been added; those who earn between EGP 1 million and EGP 10 million annually will be taxed at 22 per cent on their income." He insisted that the tax exemption should extend to encompass the lowest income categories who can barely cover their needs. El-Masry added that the issue must be studied very carefully and asked, “is this a good time?" he explained, “we are currently trying to be a magnet for new investors, and we have to be aware of the investment attractiveness of Egypt comparing to its regional competitors." On whether the latest decisions are the result of pressure related to the IMF's visit, El-Masry said, “everything is possible." He added, “the government wants to show them that it has policies to narrow the deficit." The prominent businessman stated that there are alternatives to the tax increase. “The inclusion of the informal sector in the formal economy will help increase tax revenues and will also amplify the Gross Domestic Product [GDP] which is underestimated."
