Egypt has revised its annual budget for the upcoming fiscal year to limit the budget deficit to 13.9 percent of Gross Domestic Product (GDP), if none of the current government's planned economic reforms are implemented in time, an official government source told Ahram Online Saturday.
Last month, Minister of Finance Hany Kadry Demian had forecasted that Egypt’s budget deficit would hit 14.5 percent of GDP by the end of the 2014/2015 fiscal year, unless any of the planned reforms in the country's tax system and state subsidy programme are implemented.
Since then, the government has revised the draft budget to limit this figure considerably, while still not taking into account any pending reforms, the official told Ahram Online.
With several tax and subsidy amendments still in the pipeline, the Egypt's finance ministry has prepared two draft budgets for the next fiscal year: one accounting for the reforms, and one a "worst-case scenario" budget.
Last week, Ibrahim Mahlab’s cabinet approved a five percent income tax hike on individual taxpayers earning over LE1 million a year, to be implemented temporarily for a period of three years in an effort to shore up the nation’s coffers.
The tax will be levied starting with the January 2015 tax return collection, for the years 2014, 2015 and 2016, and is expected to boost state revenues by LE2 to LE3 billion annually, according to the finance minister.
Since its 2011 revolution, Egypt has struggled to contain a ballooning budget deficit that hit a whopping 14 percent of GDP at the end of the last fiscal year.
The new tax, which has elicited controversy in some quarters, including from the Federation of Egyptian Industries (FEI), Egypt’s industrialists’ syndicate, will offer taxpayers discretionary power over how their contribution is spent.
According the law, taxpayers will be able to choose where their funds are directed from a list of national projects in the fields of education, healthcare, housing, agriculture, infrastructure, and other public services, yet to be set by the Ministry of International Planning and Cooperation in conjunction with the Ministry of Finance.
Other planned reforms include amending and implementing a long-suspended property tax that is awaiting final presidential approval, and replacing sales taxes with a comprehensive Value Added Tax (VAT), which is yet to be approved by the cabinet.
The government has also vowed to begin cutting down on the state’s antiquated and bloated fuel subsidy programme, which Demian estimates will account for LE130 billion in expenditure in this year’s state budget.