Securing an IMF loan while keeping Egypt's new parliament happy looks a trickier proposition (Photo: Reuters)
Egypt may raise sales tax as well as levies on property, alcohol and cigarettes over the next five years in order to secure $3.2 billion in IMF funding, a document obtained by Ahram Online shows.
A delegation from the International Monetary Fund (IMF) arrived in Cairo on Sunday to begin final talks on an emergency loan. The borrowing is contingent on Egypt's interim government presenting the global body with proposals on how it would reform the country's economy.
Ahram Online has obtained a copy of the eight-page document listing the interim government's proposals. Currently under review by Egypt's new parliament, it shows a raft of potentially controversial economic amendments.
Key to the proposal is the goal of cutting public debt to some 60-65 per cent of Gross Domestic Product (GDP) by 2016/17, mainly through raising tax revenues and one-off sales. Total domestic debt was 72.2 per cent of GDP in December 2011.
The document proposes a shake-up of Egypt's sales tax, including unifying rates, simplifying rules and rationalising exemptions.
It says sales tax laws are currently being amended and will be ready to be applied in the 2013/14 financial year. Such changes will generate an additional 1.3 to 1.6 per cent of GDP, claims the document.
Sales tax was first introduced to Egypt in 1991 following an agreement with the IMF. The rate floats around 10-15 per cent, depending on the nature of service or good, with the end-consumer bearing the burden.
The programme says little about income tax, despite long-standing demands from some quarters that Egypt's tax structure be made more progressive.
"Applying a package of adjustments on the income tax law to realise larger collection base and strengthen taxation justice," is one suggestion made in the programme. No further details are given
It also says taxes on alcoholic beverages and cigarettes will be raised to fall in line with "international norms". Such a measure would raise an extra LE6.3 billion a year, the document claims.
Another proposal is upping taxes on property-holders to generate an annual LE2 billion. The tax on selling property, however, will remain at 2.5 per cent.
The program added that taxes on agriculture lands, which has been unchanged since 1989, will be adjusted but failed to provide more details.
Short link: