21 - 27 June 2001
Issue No.539
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Al-Ahram Weekly Online 21 - 27 June 2001 Issue No.539 |
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Inauspicious timing
It's the best time to go shopping, before prices rise by 1 July when the final stages of the sales tax come into effect, reports Mona El-Fiqi
Not only are shoppers now being given the red-carpet welcome by vendors all over the city, but they will more likely than not be treated to a handsome discount as well.
Waiting for buyers
photo: Kamal El-Garnousi
Downtown Cairo's usually busy shopping centres are dismally vacant. The recession is evident even in the most vital streets -- Al-Azhar, Port Said, 26th of July and Abdel-Aziz -- which are famous for selling everything from durable goods, clothes and leather products to mobiles and electronic equipment.
But these same areas were not so calm some days ago, when dozens of traders took to the streets to protest the implementation of the second and third stages of the sales tax. They closed their shops and went together to the offices of the Cairo Chamber of Commerce (CCC) to demand postponement of the final stages of the sales tax law. Their efforts, however, were in vain. Law No 17 for year 2001 had been approved by the People's Assembly three weeks before.
"This might not be the most effective manner for traders to express their opinion," CCC Chairman Mahmoud El-Arabi told Al-Ahram Weekly. "We did the best we could. We submitted memos and held meetings with government officials to persuade them to postpone. But it is over now."
Traders had hoped the market would be revived by July, when school exams will have passed and people's incomes are channelled to shopping instead of to private lessons for their children, and when expatriates return for the summer holiday. Their hopes were dashed when the government decided to implement the final tax phases starting 1 July.
According to El-Arabi, the criteria upon which the government has based its imposition of the tax on 150,000 to 200,000 traders out of a total of four million wholesalers and retailers in Egypt are unclear.
Also, while disregarding the traders' point of view, the government has approved the postponement of both the cheques law and the extra fees on vehicle sales, after complaints the two would exacerbate the recession. "The government has double standards," El-Arabi charged.
Another complaint on the part of large dealers is that since the tax will only apply to traders whose sales volume exceeds LE150,000, smaller merchants will be in a better position to undercut the larger ones.
Mahmoud Mohamed Ali, head of the Sales Tax Authority had told Al-Ahram Weekly in an interview last month that the application of the final phases of the sales tax will not represent a new tax burden on consumers who have been paying the sales tax since 1991.
But there are fears that distributors will charge to the consumer the additional tax they have to pay to the government.
The uncertainty has led some traders in Port Said Street to close down their businesses. "They believe it is better to sell their business, deposit the money in a bank and receive an interest rate of 10 or 11 per cent without any effort on their part or trouble with the tax authority," El-Arabi said.
Many others are thinking along the same lines. Mohamed Abul-Ezz, owner of a shop in Al-Azhar Street, said that during the last two years, his sales fell by 25 per cent and he expected a further decline that could reach 50 per cent after the tax. "If this happens, I'd be better off shutting down," he said.
It is also feared the sales tax will negatively impact unemployment, as traders begin to cut costs by cutting down on the number of workers in their shops. Magdi Mohamed Hussein, another shop-owner in Al-Azhar Street, said, "They stand around all day doing nothing. How am I expected to pay them in this recession?"
Ever since the People's Assembly approved the sales tax law, the Sales Tax Authority has been making announcements that traders should register their names with the authority before 23 June, issuing a warning in the media that, after the deadline, unregistered traders will be punishable by law.
As far as Abul-Ezz knows, the vast majority of traders have not registered their names. "I am afraid of going. In fact, I do not know what the authority intends to do. I am waiting until other traders try first," he said.
The CCC has attempted to offer a solution to the problem, El-Arabi said. It presented a memo to the finance minister suggesting a new tax system that is acceptable to traders and, at the same time, provides a double tax income for the government. The system divides people into categories, with each liable to a different tax rate based on income levels. Although the suggestions were favourably received by the minister, no action has been taken on the matter.
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