Al-Ahram Weekly On-line 18 - 24 January 2001 Issue No.517
Published in Cairo by AL-AHRAM established in 1875		Current issue | Previous issue | Site map

The view from within

Building trust

As the new tax year begins, the government should seriously consider reducing income taxes to revitalise the national economy. At present the Economic Ministerial Group is negotiating the extent of this reduction. Opinions vary in this regard. While some call for a 35 per cent tax on annual income exceeding LE30,000, others propose a maximum of 30 per cent on annual income exceeding LE40,000 -- a rate that I strongly recommend.

Currently, Egypt's income taxes are among the highest in the region -- a situation that has negative implications for the Egyptian economy.

Reducing income taxes is a step in the right direction. To understand why this is so, one need only look at measures taken by neighbouring countries. Lebanon and Syria, for example, managed to create an environment more conducive to business through introducing significant reductions on income taxes. This could have a negative impact on Egypt's economy as better investment incentives offered by other Arab economies could attract capital needed domestically.

Ironically, economic activities in the new industrial zones enjoy a 10-year tax holiday. This absolute exemption for such an extended period is unheard of in other countries. I consider it to be excessive. It is true that the government wants to encourage industry in these new cities, but it would have been more practical to introduce a tax reduction for a specific period as an incentive.

While those who should pay income tax on an annual basis in Egypt are estimated to be five million, only 500,000 submit their annual tax reports. I hold the government primarily responsible for this phenomenon of tax evasion. The government should set a good example for itself as a taxpayer. Yet, governmental authorities owe billions to the Tax Authority -- and these debts are growing. Moreover, a trustworthy government should absolutely refrain from indirectly urging tax collectors to collect more. This has been one reason for tax evasion.

Hassan Mohamed Kamal, board member of the Egyptian Society for General Financing and Taxes and professor of taxation and accounting at Aim Shams University.

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