- Wages, pensions restructure and administrative reform needed

Minster of Finance, Dr.Ahmed Galal deemed taxes as an instrument of the financial policy affecting economy seriously; so the government consciously opted not to raise taxes currently but to pursue an expansionary economic policy. In a meeting at the final session of the social dialogue conference on taxes organized by the Egyptian Society for Taxation , the Minister said "economy is still recovering; when it activates, a different taxation approach is needed to raise resources contributing to bridge the budget deficit , that in turn benefits investors and citizens in general".

He also asserted that tax proceeds in Egypt as a proportion of the GDP is lower than in similar states, so a complaint from tax burdens is groundless. He added "we want just and transparent taxes with fair and non-arbitrary procedures. we call on taxpayers to pay off their dues, we also call on financial advisors, experts and accountants to play their role with the Finance and financiers in ensuring the integrity and balance of the taxation system in the country."

The minister disclosed the ministry would be ready to review the formation of the supreme council for taxation taking measures necessary for public interest. He also asserted, in the dialogue run by Dr, Ahmed Shawqi , Head of the Society, the need of the state administrative system for deep reforms everywhere even for a long time. He also reiterated wages in the government system should be restructured as it is unreasonable that the basic salary be 20% of wage while 80% be for variable remuneration. The reform of wages should also be linked with insurance and pensions to ensure honorable pensions after retirement, without a sharp decline in income as happening now.

The minister welcomed the decentralization of tax dispute resolving committees, and the return of appeal committees on property tax to governorates, so the role of the central committee of appeals at the Department is to support the work of such regional committees.

When the minister asked if the time of imposing the VAT proper and if it has negative impact, he said "I wonder if there is ever a proper time to impose a tax?! A tax is unwelcomed at anytime, no time suitable 100% for a tax or non- tax decision but the public context should be considered within which the shift to the VAT is taking place. we refused to raise taxes as this contradicts the expansionary approach the government has taken. This doesn't mean the government isn't in need for resources; one of their means is the shift to the VAT. The advantage is that we don't introduce a new tax as it is very close to the current sales tax with better features such as deducing inputs from the taxpayer so that he can pay only on the value added taken place in his stage. It is said that it will overburden the taxpayers and raise prices; this can be rebutted by the rate of tax we will decide. "

The Minister added "some states impose 14, 18 and 22%, but we won't do that. When tax rate is balanced, it will not affect market prices while the impact of resources accruing will be neutral."

He concluded that the VAT is very important in many advanced and developing states as it includes justice and good revenues at the same time. Realizing social justice entails resources sought on the short term by collecting arrear, facilitating reconciliations and resettlement of disputes, but on the medium term, the coming governments will need resources to achieve the social justice and fiscal balance. The tax is important on all levels to ensure a safer society to investor and citizen and develop the life of the poor.

Dr.Galal asserted making a good VAT law with IMF technical cooperation in this field and posing a draft to the society for discussion.

On questions about attracting investments with this a great number of taxes, the minister emphasized that taxation resources in Egypt as a proportion of the GDP is lower than in similar states which compete Egypt in attracting capitals. The investor doesn't go to a state according to the taxation factor only , but to more important factors such as political stability , constant approaches , credible policies , available political accountability , consultation on decisions , easy entrance to and exit from markets ,nature of work market , available skills and investment climate in general in terms of easy procedures , infrastructure level , available energy and other factors.

The minister underlined "the importance of combating the political and administrative corruption to enhance the process of accountability, transparency, balance of powers and the peaceful transfer of power , all of which will limit a lot of corruption stemming from policy imbalance and its favoritism resulting. The administrative corruption combating entails deep reform in public institutions. "

The minister concluded urging everyone to give up his own interests nowadays as national responsibility requires helping the country in this difficult time.

(Source: Ministry of Finance)



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