Egyptian Assembly Approves Higher Taxes On The Wealthy

Egypt’s parliament approved a new income tax law on Monday that will increase levies paid by the wealthy and by companies but reduce it for people in lower income brackets.

Income inequality was one of the issues that sparked the uprising that ousted autocratic president Hosni Mubarak in 2011.

President Mohamed Morsi’s Muslim Brotherhood held up the changes as proof of its commitment to social justice – a possible vote winner with parliamentary elections approaching later this year.

The new tax regime may also help Egypt in its negotiations for a $4.8 billion loan from the International Monetary Fund. The IMF is asking the government to reduce a budget deficit expected to reach 11.5 percent of gross domestic product in the year to end-June.

The new taxes, which have yet to be ratified by Morsi, will become effective within one month of their final approval.

“The law aims to achieve social justice and increase taxes on those with higher incomes. The changes are biased towards those with limited incomes,” said Mohamed El-Feki, chairman of the Shura Council’s finance and economy committee.

The Shura Council, or upper house of parliament, is responsible for passing legislation in the absence of a lower house. Morsi has said elections for the lower house may get under way in October.

All companies would be taxed at a unified rate of 25 percent, compared to the present law that charges those earning less than 10 million pounds per year at only 20 percent, Mamdouh Omar, head of Egypt’s tax authority, told Reuters by telephone.

People earning under 5,000 Egyptian pounds ($720) a year would remain exempt from all taxes, as before. But the rate on those making more than 250,000 pounds would rise to 25 percent from 20 percent, the state MENA news agency reported.

Reuters