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Government may raise taxes to meet expenditures: Finance ministry - Daily News Egypt

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Government may raise taxes to meet expenditures: Finance ministry

Minister of Finance says additional revenue vital to reining in budget deficit

Finance Minister Ahmed Galal  (AFP PHOTO  ERIC PIERMONT)
Finance Minister Ahmed Galal

The recent increases in public expenditures have prompted the government to consider additional means of revenue generation, according to the finance ministry.

Minister of Finance Ahmed Galal said his ministry would have to consider additional taxation in order to meet the spending from increases in minimum income, social solidarity pensions and the rising spending on the health and education sectors.

“Without real and adequate [financial] resources, [the government] will not be able to achieve public demands,” Galal added, according to a Friday statement from the ministry.

Such revenue, he said, would be vital to rein in the budget deficit, a process that “all people should be concerned with.”

Earlier in January, Galal said the government had opted not to increase taxes during the transitional period in order to better suit its expansionary economic policy. However, the minister added that a modified tax system would be vital for the government after revitalising the economy.

In the first six months of the current fiscal year, tax revenues reached EGP 80.3bn, the Tax Authority said in December. This revenue represents a 19% increase (EGP 1bn) increase compared to the corresponding period last year.

Since the current government took power in July, following the ouster of former President Mohamed Morsi from office, it has emphasized the achievement of social justice.

Last week, the interim government decided to increase social solidarity pensions by 50%, which will be directed to 1.4 million low-income families, effective January. This increase will cost the budget EGP 1.2bn, state-run news agency MENA quoted Prime Minister Hazem El-Beblawi as saying.

The total amount of funds allocated for social solidarity pensions in the 2012/2013 fiscal year ranged between EGP 4.7bn and EGP 4.8bn, Deputy Prime Minister Ziad Bahaa El Din said.

The new constitution, ratified in January, increases the spending rates to 3% of GDP for health, 4% for education and 1% for scientific research.

In September, the cabinet decided to set a minimum income of EGP 1,200 per month for public workers. Galal later said over 4.8 million workers would benefit from this system.

According to Galal, implementing the minimum income law will cost the public treasury upwards of EGP 20bn.

In October, the government decided to increase the pensions of government workers by 15%, meant to be effective this month.

Expenditure on wages and compensations comprised EGP 141bn of the state’s budget in the fiscal year 2012/2013, representing a 14.8% increase from the preceding year.

Public school students have also been exempt from paying the tuition fees this school year, which the government considered “an attempt to alleviate the financial burden on citizens”. This initiative cost the government EGP 700m, according to the Ministry of Education.

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