The recently announced tax hikes ratified by President Mohamed Morsi and revoked by him shortly after due to public outcry target tax evasion loopholes that are being exploited by some to avoid financial accountability, said Momtaz El-Said, Egypt's minister of finance, in a press statement following a meeting with the Egyptian Federation of Investment Association (EFIA) on Sunday.
"Amendments to the tax law in reality will not affect low-income segments, and are not in any way burdensome to the most disadvantaged in our society, said El-Said.
Abolition of sales taxes on capital good will definitely boost national industry, and will attract investors at a time where our economy needs it the most, El-Said claimed while addressing a group of Egyptian businessmen and investors.
El-Said denied criticisms by opposition groups that the hikes are part of an austerity package imposed by the International Monetary Fund (IMF) as loan conditionality, and asserted that the income raised will attract Foreign Direct Investments (FDIs) and curb youth unemployment rates
Government officials argued that the new tax law presents an incentive for Egypt's unofficial sector to finally become "legitimate" as it will be exempted from all tax dues on its commercial activities over past years.
"Commodities that were included in the new tax rates were carefully chosen as to keep low-income citizens unaffected," El-Said said during the press conference.
Egypt's prime minister, Hisham Qandil, had previously said that the economic measures included in the new tax law will relieve the country's liquidity crunch, reduce budget deficits and ease currency depreciation risks.
Among other products, sales taxes were increased on steel, cement, soft drinks, beer and cigarettes as well as new sales tax on a variety of services, including mobile-phone services, air-conditioned transportation, and cleaning and security services, among others. Stamp duties were also doubled on bank facilities and loans.