Social support laws

Gamal Essam El-Din , Tuesday 17 Oct 2023

Parliament has approved two laws aimed at giving financial support to limited-income classes and attracting foreign investments

Social support laws
Parliament approved a bill allowing Egyptian expats to import a tax-free car


Following procedural sessions two weeks ago, parliament got down to business on Sunday and Monday, grappling with a new host of laws and foreign agreements, reports Gamal Essam El-Din.

On Sunday, it gave final approval to amendments to a 2022 law aimed at raising the exceptional cost of living allowance to LE600, up from LE300, for all state employees within the state administrative system, economic entities, state-owned enterprises, and public sector, starting this month. Parliament also doubled an exceptional grant to pensioners to LE600 from LE300.

It also approved amendments to the income tax law that would raise the tax exemption threshold by 25 per cent to LE45,000 from LE36,000.

The two government-drafted bills are part of the social support package announced by President Abdel-Fattah Al-Sisi last month to lend greater financial support to limited-income classes to help them mitigate the impact of soaring inflation.

On 16 September President Al-Sisi said in a conference in the Upper Egypt governorate of Beni Sweif: “I fully appreciate the extent of the suffering of Egyptian families in the face of burdens resulting from the negative economic effects of the global financial crisis triggered by the coronavirus pandemic and compounded by the Russia-Ukraine war.”

He indicated that for this reason, he decided to introduce the new package regarding increased financial support to vulnerable classes.

Minister of Parliamentary Affairs Alaaeddin Fouad said it was important that parliament kicks off its new legislative season by discussing and voting on President Al-Sisi’s new package of social support measures.

Fouad said this was not the first time President Al-Sisi and the government introduce social safety measures to protect the poor and limited-income classes. “Since the war erupted in Ukraine in February 2022, the president and the government have announced three social protection packages to help the poor and low-income earners bear the high cost of living triggered by the war and other crises,” Fouad said.

Fakhri Al-Fiqi, head of parliament’s Budget Committee, said the new social support laws will cost LE50 billion. “It will cost LE18.5 billion to benefit 13 million public and private sector employees, and will cost LE32 billion to benefit 11 million pensioners,” Al-Fiqi said.

A committee report said the government’s policy of introducing income tax exemptions has led to increasing income tax thresholds by 275 per cent in nine years, or from LE12,000 in 2014 to LE45,000 in 2023. “This has gone hand in hand with raising minimum wages by 233 per cent in nine years, or from LE1,200 in 2014 to LE4,000 in 2023,” the report said.

The report indicated that the amendment to the 2005 income tax law reflects the government’s new policy of relieving limited-income citizens of some tax burdens and raising minimum wages to achieve social justice. The report said Article 8 of the law will be amended to introduce the following changes to tax brackets. Annual income between LE45,001-LE60,000 will be taxed 10 per cent; LE60,001-LE75,000 will be taxed at 15 per cent; LE75,001-LE215,000 will be taxed at 20 per cent; LE215,001-LE415,000 will be taxed at 22.5 per cent; LE415,001-LE1.2 million will be taxed at 25 per cent, and income above LE1.2 million will be taxed at 27.5 per cent.

On Monday, parliament approved three other draft bills, all aiming to attract foreign investments and increase the country’s sources of foreign exchange. The first bill will open the door for an additional three-month extension of an initiative that allows Egyptian expats to import a tax-free car and in return place the equivalent of saved duties and taxes in US dollars in a five-year certificate of deposit. The explanatory note attached to the bill said the initiative could be extended for another three months upon the approval of the prime minister.

The bill, however, did not win easy approval from MPs who raised doubts that the new extension will generate considerable foreign exchange revenues. “We will approve this bill so as not to embarrass the Finance Ministry which had previously claimed it would generate $2.5 billion,” said head of parliament’s Economic Affairs Committee Mohamed Suleiman, adding that “the first and second rounds of the bill generated only 10 per cent of the targeted revenues”. Abdel-Moneim Imam, head of the opposition Adl (Justice) Party and secretary-general of the House’s Budget Committee, said this was the third time for the bill to be amended, with only 184,000 expats taking advantage of it and generating only $0.5 billion instead of the targeted $5 billion.

In response to critics, Minister of Parliamentary Affairs Alaaeddin Fouad defended the draft bill, insisting that the third amendment comes in response to demands raised at the end of a conference held by Egyptian expats two months ago, the result of which the Finance Ministry and the government approved the extension for another three-month period.

According to Fouad, as many as 184,900 expats have so far registered under the initiative and that it has generated $450 million, and is expected to reach $1.1 billion by the end of the new three-month target period.

Mustafa Salem, deputy chairman of the Budget Committee, seized the debate over the bill to hail what he called the political leadership’s rejection of any further devaluation of the Egyptian pound. “Recently, we have been facing tremendous pressure from international credit rating agencies like Moody’s and from financial institutions like the IMF and all want the government to devalue the Egyptian pound, but we should not submit to this pressure,” said Salem, adding that “if we submit to this pressure and to the directives of the IMF and decided to further devalue the pound, we would expose millions of poor and limited-income Egyptians to great danger as a pound devaluation means a dramatic rise in prices and very difficult living conditions for the majority of Egyptians.”

Parliament also voted in favour of amendments to the 1982 importers registry law. The bill is aimed at further liberalising the Egyptian market in terms of allowing non-Egyptian investors to be registered as importers under a 10-year licence. It also allows non-Egyptians to hold up to 49 per cent of a trading company importing to Egypt. This applies to limited liability companies, joint stock companies, one-man companies, and individual companies.

The draft bill’s explanatory note said the amendment reflects the government’s policy aimed at attracting greater foreign investments into the country. This will happen by opening the door for foreign companies to be registered in the importers registry to make it easier for them to import goods and production inputs into the country, said the note, also indicating that the bill reflects one of the decisions taken by President Al-Sisi’s-led Supreme Investment Council in May.

Also approved on Monday was a draft bill granting the Safaga Stations Operating Company the right to build and improve the infrastructure of the Red Sea’s Safaga Port as well as handle its management and operation for 30 years. This will come through cooperation with a consortium from three foreign companies led by the UAE’s Abu Dhabi Ports.

According to a committee report, the bill aims to make use of the private sector’s expertise in improving the performance of Safaga Port, attracting new shipping lines to the port, generating job opportunities, and achieving “good economic results” for the national economy.

* A version of this article appears in print in the 19 October, 2023 edition of Al-Ahram Weekly

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