Electronic transactions modernising Egypt’s tax, finance systems
Egyptian Finance Minister Mohamed Maait said he was acting swiftly to wrap up the 100,000 tax appeals filed and to remove obstacles from investors’ paths.
Maait said tax disputes that have been settled include major investment companies operating in the food industry, mills, engineering services, chemical industries, telecommunications, tourism and electronics, as well as import-export companies.
He pointed out that the initiative was meant to alleviate burdens on investors and reflects the government’s desire to improve investment conditions in Egypt. He noted that the government has no intention of increasing taxes and said his ministry’s plan was to maintain the stability of the government’s fiscal and financial policies to create a suitable business environment.
The Egyptian Finance Ministry is involved in expanding the base of taxpayers without disturbing tax rates through an electronic payments system, Maait said. “The government is updating tax schedules destined for investors with the idea of consolidating any investor’s various tax files under a unique registration number beginning next May,” he said.
Tax revenues account for 77.8% of total state budget revenues in Egypt and about 14.6% of the country’s GDP. The government is seeking to increase that percentage to about 18% of GDP within four years.
The Finance Ministry has prepared a draft of the electronic bill and projects relating to taxes on advertisements in websites and social network platforms and to the e-commerce sector, in general, are in the works to gather a greater share of e-commerce in global and domestic trade.
Maait said the state’s electronic system of public finance has been activated. The ministry has closed 61,000 bank accounts held by government agencies and replaced them at the central bank with a Unified Treasury Account.
Government payments by paper cheques have been eliminated and all payments are made electronically. This has led to an improved overall performance and sped up the transfer of funds to government services, Maait said.
He pointed out that the state budget has been fully digitised, from the preparation phase to the final closing of accounts. He said the Finance Ministry faced a series of challenges in this regard, including training 15,000 employees on the new methods.
The new budget, which goes into effect in July, is focused on the social dimension and on attaining a growth rate of about 6.5% on the way to achieving 8% growth by 2021-22.
To reach those target rates, an average rate of 25% in investments is needed, Maait pointed out, saying the unemployment rate must be reduced to about 8% from its current 11.8%. The country’s economy must provide 900,000 new jobs annually and poverty rates must be below 25%, he said.
Maait said Egypt’s GDP during the new fiscal year will reach $350 billion, compared to this year’s $295 billion. The goal is a surplus of 2% in the budget before deducting interest on public debt. This will contribute to reducing the state budget deficit to 7% and drive inflation rates down to about 10.9% annually, he said.
The government plans to reduce the public debt-to-GDP ratio to approximately 80% in the 2021-22 budget, compared with 108% in 2017 and 91% in the current fiscal year.
Maait said the economic reform programme implemented by Cairo in the last period and financed by the International Monetary Fund (IMF) has been hailed as a success by credit rating institutions. The agencies have an overall positive picture of Egypt’s economic future, Maait pointed out.
He stressed that the economic reform programme was 100% locally designed and is working following the government’s planning efforts to implement it.
It was like bitter medicine for a patient and the IMF acknowledged the Egyptian economy’s capacity for growth, another success of the reform programme.
Maait also highlighted that Egypt has not fallen one day behind paying its external debts and meeting its financial commitments, which should strengthen the confidence of foreign investors in the investment climate in the country.
In the current state budget, the interest payments on Egypt’s external debts stand at about $30 billion, which represents about 10% of GDP and about 38% of the overall budget.
Maait said the reform programme’s plans for restructuring subsidies aim to make sure subsidies reach only deserving people. This explains increases in spending on health, education and social protection programmes.
Oil subsidies have fallen $1.2 billion, now accounting for 26.7% of the total state subsidies. Last year, they represented 33%.
Four phases of the planned five in lifting fuel subsidies have been implemented and the last phase will see the total liberation of energy prices. It was meant to be implemented in July but Cairo opted for the implementation of a new pricing mechanism for 95-octane gasoline by the end of last December and it is expected that the same mechanism will be extended to other types of fuel and to electricity in the coming months.
Maait said the government is developing a partnership programme with the private sector in the implementation of infrastructure projects, utilities and public services. The move is to relieve the state budget of some funding of such projects, provide better services to citizens and attract more foreign direct investment.
The minister said partnership programmes with the private sector in infrastructure projects, utilities and public services enjoyed wide political support and great cooperation from all ministries. There are plans for including the private sector in the construction of 54 schools, the main administrative building of Ain Shams University and a dry port in 6th of October city.