Egypt's President Morsi unveils raft of tax, subsidy reforms

Ahram Online, Monday 25 Feb 2013

President Morsi introduces novel tax and subsidy reforms, discusses Egypt's short-term economic prospects in televised interview Sunday night

Morsi interview
President Morsi's interview with television host Amr EL-Leithi (Photo: presidency Official Facebook page)

In a televised interview Sunday night, President Mohamed Morsi unveiled a raft of new tax reforms.

For one, the president announced that the minimum monthly income for income tax exemption would be raised from LE9000 to LE12,000, which, he said, "will alleviate the tax burden on an additional 2.5 million Egyptian families."

He also declared that social security pensions for low-income families would be raised by LE100 to LE400 a month according to the new state budget.

The president spoke at length about the state of the national economy during the two-hour interview, including the issues of foreign borrowing, taxation, subsidy reform and social justice.

He announced that the price of one ardeb (198 kg) of wheat would be raised by LE20 to LE400 in order to boost local production, and that new measures would be taken to facilitate supply, which, he said, "I know remains a problem for farmers."

"The price of rice has gone up by LE2000 as we had promised farmers," Morsi went on, "since we are now exporting rice."

The president also confirmed implementation of a progressive property tax, starting in July of this year, on all properties worth LE2 million and above, saying that "50 percent of property tax revenue will be spent on providing public services such as shantytown development and healthcare."

Regarding a proposed $4.8 billion loan Egypt has been struggling to secure from the International Monetary Fund, the president asserted that the IMF loan "also represents certification that Egypt’s economy is capable of surmounting the current period." He added that the IMF "does not intervene in our affairs, but we need this certification in order to unlock more investment."

In January, the European Council announced that the EU would grant a $6.5 billion load to Egypt once the latter had sealed its loan agreement with the IMF.

As for state subsidies, which require reform in order to meet the IMF's loan conditions, the president pledged that subsidies on goods and transportation "will remain in place for those in most need of them."

As evidence of the government's ability to target subsidised goods towards the needy, Morsi cited the success of a new allocation system for butane gas canisters, asserting: "This winter is the first in 15 years to see no shortages of butane gas canisters."

"Microbus and truck drivers who need subsidised fuel will find it available at the same prices," the president added, "but not those who steal and smuggle it for profit."

Last week, the Ministry of Petroleum and Mineral Resources announced plans to begin rationing subsidised fuel through a new 'smart-card' system beginning in July of this year.

Asked about recent statements allegedly made by Prime Minister Hisham Qandil – that Egyptians would only be entitled to three loaves of subsidized bread per day – Morsi vehemently denied them as "media fabrications." The president also denied that there were any problems regarding the availability of subsidised bread, though in some areas, he conceded, "the quality of the bread may be less than optimal."

According to the president, a system of universal health insurance will be implemented in three phases beginning next year, with LE5 billion to be allocated from the next budget during the first phase.

Morsi also promised to issue a decree in the near future absolving students in the public education system who had failed to pay their tuition fees for the current academic year.

The president went on to deny that there were any special ties between certain businessmen affiliated with the Muslim Brotherhood – the group from which Morsi hails – and his administration. "We suffered from this phenomenon under the former regime, and do not want to see it repeated," he said.

President Morsi also confirmed that draft legislation was now on the drawing board aimed at reinstating Port Said's duty-free zone – abolished by the Mubarak regime in 2002 – and that LE75,000 had been earmarked for compensating the families of Port Said residents slain in last month's political violence. 

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