Economy in a week: New taxation to support ‘social justice’

The 50-member committee tasked with amending the constitution will implement progressive taxation to attain a degree of social justice and equality among Egyptians, increase government resources and boost economic growth, as stipulated in the text of Article 37 of economic fundamentals.

The head of the committee, Amr Moussa, said Saturday that the taxation system has been approved and will be included in the amended constitution, which will be subject to final voting on Sunday. The constitution’s final draft will be referred to Interim President Adly Mansour to ratify.

Proportionate to the level of income, progressive taxation should not have dire effects on the appetite of foreign investors as Egypt has signed the multilateral Double Tax Avoidance Agreement, according to Hamdy Abdel Azim, a former professor at Sadat University. The agreement states that foreigners can pay taxes in their native countries if they wish to avoid local taxes, he said during an appearance on the television show “45 minutes.”

Some experts believe it is preferable to implement Value Added Tax (VAT), property and corporate tax systems, as opposed to progressive taxation.

In a Wednesday statement, Minister of Finance Ahmed Galal said it would be logistically difficult to apply progressive taxation on stamp and sales tax, as it is not possible to differentiate between citizens in specific levy categories.

World Bank continues financing projects in Egypt

Ahmed Galal told the state-owned Al- Ahram daily Thursday that the World Bank will finance four projects in Egypt targeting social development, education, health and infrastructure, in addition to fighting poverty.

Following a Thursday meeting with Galal, the Egyptian State Information Service website quoted Hassan Mirza, World Bank executive director for the Middle East, as saying that the Bank has “increased the number of its experts in charge of offering technical support to Egyptian programs and projects in view of the bank’s support for the Egyptian government and its socio-economic reform plans.”

The minister did not disclose the amount to be invested. However, an unnamed source connected to international financing organizations said it will be around US$2 billion. The loan will enjoy a seven-year grace period, with an interest rate of one percent to be paid over twenty years.

Saudi Stream of cash continues

More money on Egypt’s horizon, as a package of Saudi financial aid is being negotiated, a finance ministry official told the Turkish Anadolu news agency on the condition of anonymity.

The official added that the aid package is expected to include US$1 billion in non-refundable grants. The government plans to exploit the financing to stimulate the economy and revive stagnant economic sectors, particularly construction, tourism and investment.

The package amounts to US$5 billion and will be in the form of grants, a deposit at the Central Bank and petroleum products.

Petroleum Authority to implement second pilot phase of smart cards

As Egypt secures foreign financing to avert its energy crisis, the government has proceeded with the second pilot phase of its rationing smart cards project. The cards are intended to prevent fuel smuggling and decrease dependence on subsidies.

Chief Executive of the Petroleum Authority Tarek al-Molla inaugurated the second phase on Sunday after implementing the smart card system in over 400 privately owned gas stations across Egypt. Government-owned stations, Misr and Co-Op, are currently being upgraded with the new system and should be fully equipped in two weeks.

In a statement, Molla said that the second phase aims to monitor quantities of fuel consumed in gas stations for all user segments of petroleum products.

The first phase, executed in June, has successfully automated 15 fuel marketing companies, 102 petroleum depots, and 2,646 gas stations across Egypt. 

Economy week in numbers

·       Egypt’s benchmark EGX30 ended the week with a 0.34 percent drop on Thursday, after a disappointing performance throughout the week. The index is still holding up above the 6,000 support mark.

·        World Bank reports that international food prices dropped by six percent over the past quarter, yet remain close to  historical peaks.

·       The Ministry of Finance sold treasury bills worth LE5.5 billion on Sunday. Ninety-one days bills were covered 2.67 times with an average return of 10.624 percent, while 273 day bills were covered 1.9 times with an average return of 11.15 percent.

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