Al-Ahram: A Diwan of contemporary life (655) Tax and tribute One is based on the rule of the individual, the other on representative governance. Both are mirrors of governmental systems, but Professor Yunan Labib Rizk adds that the transition from tribute to tax has been incomplete Contrary to the situation in the Western world, it has settled in the minds of Egyptians that what the authorities in Cairo collect from them, whether in the form of money in the modern period or a share of agricultural crops prior to that, is a form of tribute the government receives in return for their protection, either by its military forces against external threats or its security men against domestic threats. Egyptians have considered it nothing else. This understanding was reinforced by the division between Egyptians and their rulers throughout the centuries prior to the arrival of the French expedition in the late 18th century (1798), whether the Mamlukes or the Ottomans, who ruled for nearly three centuries. Egyptians had no part in the protection of their country, whether from foreign aggression or in terms of providing domestic security. The Janissary corps undertook protection from foreign aggression, while the Ottoman Azban corps was in charge of domestic security. The concept of tribute differs from that of taxes in that payers cannot hold collectors accountable for how it is spent, on the basis that they already received their return in advance. Tribute payers are the weak party that cannot hold rulers accountable, contrary to the situation in the Western world, where the greatest of all covenants, the Magna Carta, was made law. It was from this that the barons wrested from King John of England the concept of taxes so long ago, in 1215 to be exact. This covenant guaranteed the famous principle of "no taxation without representation", which historians consider the true birth of constitutional life. It cannot be said that the transformation from the concept of tribute to that of taxation occurred suddenly in Egypt. And it can in fact be claimed that its foundations have not yet been completed to this day. With regard to the transformation's occurrence, it began to develop with the arrival of the French expedition in Egypt. The protection undertaken by Ottoman-Mamluke rule had settled into the depths of Egyptians' minds as being from "infidel Franks" who their last interaction with had been as soldiers in the Crusaders' campaign led by Louis IX. For a new "edition" of these to arrive under the leadership of Napoleon Bonaparte and for them to inflict defeat after defeat upon the rulers who in the end could only flee, either south to Upper Egypt or north to the Levant, meant the collapse of the primary reason for accepting the continuation of tribute payment. This was made apparent in the successive revolts against the old rulers who returned to the country during the short period following the departure of the French from the country (1801-1805). These revolts were primarily motivated by the returning rulers' exaggeration in following the former means of collecting money from Egyptians. The most prominent were those held against the Mamlukes, during which was chanted the famous call, loosely translated, "What can you take from my bankruptcy, oh Bardisi?" with all its economic references. As for the foundations of taxation being completed, it cannot be claimed that this has occurred despite the influences left behind by the French expedition and the agreement that (1805-1848) created a "modern state", one of whose bases was supposed to be the transformation from tribute to taxation. It is true that some of the factors that made Egyptians accept the concept of tribute weakened. These included the perception of foreign military forces following the formation of the modern Egyptian army composed of peasant farmers, as well as the traditional fear of Franks inherited from the Middle Ages after they filled government agencies as experts and spread among the ranks of the people as merchants and business owners. Other factors included the fear of invasion after the French expedition proved a fact unknown until then, that the Franks who arrived in the late 18th and early 19th centuries came "bearing science and progress" as opposed to those who had stormed them seven centuries earlier "bearing the cross." This was discovered by Sheikh Abdel-Rahman El-Gabarti, Sheikh El-Attar and others after mixing with the scientists of the expedition. Yet while all this is true, it is also true that the system of rule could not be changed in a night and a day. Tribute is created by rule of the individual, while taxation is based upon representative governance. It could not disappear after having settled in the psyche of rulers and the ruled for such a long time. This is made clear in both the behaviour of rulers and administrators. Rulers have been intent on the issue of the state budget not consuming much time in the work of representative councils in all stages of their development, from the time the representative consultative council was established in 1866 until this day. Those responsible for the preparation of the budget throughout Egyptian parliamentary history have always been certain to fill it with numbers in a manner which makes it beyond the comprehension of members of the representative councils with the exception of their specialists. As for administrators, they have dealt with the ordinary public, to this day, as though they are bearers of authority, a concept that grows with the notion of tribute, and not as servants of the people paying their salary, a notion tied to the idea of taxation. Moreover, these ideas settled in the psyche of Egyptians, who in turn dealt with rulers and administrators on such a basis. As put by the popular leader Saad Zaghloul Pasha, Egyptians continued to look at their rulers with a view of a "bird to a hunter, and not the view of a people to a leader." This perhaps explains, in the end, the historical reasons that drove Egyptians to avoid paying taxes by any means. This is what the current minister of finance, Youssef Boutros Ghali, is trying to put an end to, whether through measures facilitating the payment of taxes or the media campaign orchestrated by his ministry to stress that. Yet such a matter takes time. THIS LENGTHY HISTORICAL INTRODUCTION was necessary in order to be able to follow what took place in 1937 with regard to discussions on the new tax system the government led by Mohamed Mahmoud Pasha, which followed that of the Wafd Party, decided to impose. The previous government had begun to study it until it was crushed by a royal dismissal on 30 December 1937. Behind the decision to create a new tax system were two major events that had taken place the previous year. One was the signing of the 1936 Anglo-Egyptian Treaty and the resulting new financial burdens on the Egyptian budget to form an effective Egyptian military force to defend the country after the British agreed to give up the mission of defending Egypt. This was in addition to the burden added to the Egyptian budget by preparing the necessary roads and barracks for the use of the allied state's forces. The second event was the decision in the Montreux Convention of the following year to cancel the capitulations system. This resulted in ending the era of financial forbearance that European capital in the country enjoyed, and it was in fact the majority of capital. This allowed the Egyptian government to deal with the owners of this capital in terms of taxes in the same manner that it dealt with Egyptian capital, and with the same related difficulties. No delay was made, for the government of Mohamed Mahmoud Pasha began looking into the matter shortly after it was formed and entrusted the issue to its minister of finance, Ismail Sidqi, with all his political and economic background. The first thing he did was to establish a new tax agency and form a committee led by Habib El-Masri Bey to study a new tax system. As news of this spread, those with interests began to exhibit anxiety, especially as the individual charged with laying down the new law, Sidqi Pasha, had been responsible for surprises in the past, most of which had not been happy surprises. This resulted in groups of those with interests taking action. The first of those to make a move was the men of the stock market in Cairo and Alexandria who met with Habib El-Masri Bey on 22 January 1938 in the Alexandrian Finance Ministry office to learn about the government's inclination in imposing taxes with regard to the planting and trading of cotton so that exporters would not be tied back by transactions affected by the new taxes. Al-Ahram wrote that the head of the committee "simplified for those meeting the essence of the government's policy on this subject and showed them data that convinced them of good action and the lack of violation of the rights of merchants and commercial transactions." Next to take action were the "foreign capitalists" who sensed the danger in the situation following the removal of the cover that the capitulations system had afforded them during the extended stretch of prior years. This led Sidqi Pasha to grant a lengthy interview to the British Daily Telegraph in order to reassure them. At the beginning of this interview, he repeated the handed down saying of Colbert, the French minister of finance during the reign of Louis XIV, in which he said that increasing taxes meant "slaughtering the goose who lays the government's golden egg." He mentioned that prior to the start of putting the new tax system in place, discussions were held with members of the industries committee, including two European specialists, and that the opinion of the economic council was consulted, and that this council comprised the major European interests in Egypt. Sidqi Pasha then went on to describe the policy that he would recommend the government follow as "not an extremist financial policy, for we only need income to cover what we owe in new costs and obligations. Until now, landowners have borne the entire burden of direct taxes. If we want to fill the treasury with new sources, then personal interests must bear the correct share. The burdens of direct taxes will be distributed in proportions better than the present ones once the new taxes are imposed, and at the same time, important savings will take place in the administration of financial affairs." Regarding Sidqi's statements to him, the Telegraph 's reporter commented that he learned that there was a dire need for approximately LE3.5 million, but that to start with, no more than LE1 million were urgently needed. It was not expected that Al-Ahram would remain distanced from this serious issue that affected all Egyptians and which necessarily interested its readers. This led it to devote the editorial of its Monday 28 February 1938 issue to the topic. It was titled "Economic policy and the new burdens -- the need to amend the tax system." Al-Ahram opened its article with an attack on the Egyptian government. "A government goes and a government comes and they don't follow a stable economic policy. Its state of affairs concerning the economy and finance is the same as in all else." It then turned to explaining the situation, which was the fact that the country was facing a deficit in its budget reaching LE3.5 million while the treaty had placed new costs on this budget. It did not place the blame for this on anyone but rather considered it one of the necessities resulting from Egypt shouldering the burdens of defence on its borders. Al-Ahram asked that a new law for taxes distribute them fairly, something that would call for bravery and boldness. "Is the government determined to do this, or does it fear angering some groups of power and influence, turning away from them towards groups of the poor for whom the matter causes hardship, and economic life in Egypt thus remaining in its strange nature by which some people pay everything while others barely pay a thing?" In another article, Al-Ahram came very close to distinguishing between tribute and taxation when it said that the collection of taxes in the ages of folly and decline was a source of hardship for the people due to their lack of a clear definition, the harshness of collectors, and the people's taxation at multiplied rates to the point that many preferred to migrate and leave their land in order to avoid exploitation. In comparison, taxes imposed by regulated states and respectable governments were specific and clear, with no misunderstandings or vagueness. "Europeans have grown accustomed to them in all their forms and to their continual increase in keeping with the growing burdens of the state." As more information slipped out concerning the primary features of the new tax law, interest in the issue grew, which encouraged many to participate in it, sometimes by giving lectures, at other times through readers' contributions, and yet again through articles penned by the editors of Al-Ahram themselves. This first form of participation was manifested in three lectures given by Senior Umberto Richi, a professor in the college of law. The most significant points he expressed were the difficulty of applying the Italian tax system to Egypt on the one hand, and the issues related to tax evasion on the other. He noted that there were two factors that the government must take into consideration with the new system -- the administration of taxes, or tax employees, and tax payers. While the government had taken care of the first and promised some of its employees that they would travel to Europe and study its tax systems, it also had to prepare tax payers through conducting "wide-scale promotion in schools and through newspapers, cinema, and the like." As for this second form of participation, the most important were three long articles Al-Ahram published by Nashed Abdel-Rahim, a former finance inspector with the government of Sudan and a member of the accredited Accountants Association in London. His articles were titled "The new taxes", and they firstly criticised the lack of equality in the new taxes with regard to land and exempted buildings, as well as the repeated claims that the new law imposed taxes on the basis of actual profit except for the tax of independent trades, for which it was imposed on the basis of the rent value for the place in which the trade was practiced. Abdel-Rahim described this as an abominable idea as it was limited to one type of income. He also harshly criticised the manner in which the bill pursued the profit of companies. Another contribution was made by Ibrahim Zakieddin Badawi, who held a baccalaureate and graduate degree in law. In his contribution he stressed that Egypt had its own special circumstances that increased the critical nature of the situation and raised its significance. "We are still in a primitive era with regard to the taxes we have, which do not differ much from the situation we were in hundreds of years ago." The specific Egyptian circumstances he stressed that legislators must take into consideration included Egypt's new political situation and its requirements in terms of imposing new taxes, and the foreign presence in Egypt and the necessity of imposing taxes on it in a gradual manner. As for the articles written by Al-Ahram 's editors, the most important of them was the editorial in the 28 May 1938 issue titled "The new taxes and the national duty in imposing them and studying them." The editorial requested that the economic council, the cabinet, and the two houses of parliament hasten to issue the law "for the country has a pressing need for the distribution of taxes between all the residents of Egypt in justness and fairness." Despite this call, however, the matter consumed another six months. ON THE FIFTH OF THAT MONTH, Al-Ahram printed in bold on page nine the headline "The taxes you must pay from now on..." and in a small font the following: "If you are the owner of moveable property (vouchers, shares, free loans, etc)... If you are the owner of a store, factory or company... If you receive a salary, wage, or pension, etc... If you practice an independent trade (lawyer, doctor, engineer, etc)..." Following this headline were the details. Al-Ahram noted that this was what the financial committee in the senate had passed. With regard to the first tax, it was owed on profit and interest produced by shares of all kinds, founders' shares, partners' shares in limited partnership companies, loan interest, savings interest, and monetary insurance. Its amount was set at 10 per cent of this income and was due on the first of September each year. The second tax was on "commercial and industrial profit" and was due from commercial outlets and industrial sites or those related to craftsmen trades, as well as contributing companies, craftsmen cooperatives, and bond brokers. Its value was the same as the previous tax, with the same due date, and was calculated on the basis of the true, stable profits in their budgets. Yet this tax also provided for forbearance of individuals whose annual profit did not exceed LE100. "If they are married and do not have any children the limit for forbearance is LE120, if they are single and support families the limit for forbearance is LE130, and if they are married and have children, regardless of their number, the limit for forbearance is LE150." As for the tax on "work gains", it was imposed on all salaries, compensation, wages, and pensions paid by the government, companies, and individuals to any person residing in Egypt or those abroad who provided services in Egypt. It was tied to the sum of that received in way of salaries, pensions, and monetary or material advantages. A total of LE60 was deducted from the calculation of income if the receiver was not married. Another LE20 was deducted for married individuals without children, and a total of LE100 was deducted for those married with children. Anything above that income was taxed at three per cent. Anything beyond LE150-300 was taxed at four per cent, and the gain tax increased incrementally until it reached its farthest limit at eight per cent. It was decided to rush the payment of this tax to begin at the beginning of the month following the issue of this law. The value of the final tax on "practitioners of non- commercial trades" such as lawyers, architects, doctors, accountants, and experts was calculated by the total rent value of the location in which the trade was practiced and the rent value of the private home of the practitioner. Its value was 7.5 per cent of this total, and those liable for this tax were granted forbearance during the first five years they practiced their trade. Before long a fierce campaign against the new tax system began, and it was natural for the newspapers of the Wafd Party to be at the forefront of this. Al-Jihad newspaper wrote in an editorial that more than 90 per cent of Egyptian property owners should share no part in the burdens of these taxes, the costs of which should be shouldered by no more than five per cent of property owners, those being the extremely rich and the wealthy upper middle classes. "It is only fair for the rich and their like to bear a special portion of the costs necessary for the improvement of the circumstances of the poor and wretched, and they are the vast majority of the common Egyptians." Al-Masry newspaper wrote in an editorial titled "Responsibility for shattering financial confidence in the country" that the undeniable truth was that a near crisis was on the verge of destruction of all that was prosperous. It wrote that the minister of finance was fully preoccupied with a scandalous tax report "that he insists on imposing in one go without delay or study." It then went on to say that the responsibility for this terrifying situation lay firstly on the shoulders of the current government term, "a term of impotence, agitation, and neglect of Egypt's financial interests". It lay secondly on the shoulders of the English "who commenced the era of alliance by using the current overturning to tie Egypt to the most scandalous of financial burdens and raise the costs of the treaty to a degree that surpasses that reasonable and which threatens the financial confidence that was exemplary in its stability." Al-Wafd Al-Masry newspaper titled one of its articles "Woe unto you Egyptians from the liability of previous and future taxes." These were described as being imposed upon them in the name of national defence, "which is really for the interests of the English and the defence of their empire. These taxes cut away at the flesh of Egyptians and sap of their lives; simple folk being deluded by calls for national defence." From Damanhour came the voice of its representative, "the well-known merchant Mursi Balbaa Bey," who criticised the tax on "commercial interest." He demanded that the government waive it completely and limit it to that imported by merchants while granting forbearance to those who import goods of a value of up to LE500. For imported goods at a value above that, 50 per cent should be taken up until a value of LE25,000, and 25 per cent for values higher than that. As for reader Naguib Youssef, member of the tax committee and professor of general financial science in the college of commerce, he criticised the exaggerated price of taxes on property such as profit and interest in shares. While he admitted the necessity of equality between property owners paying high taxes and the owners of shares and vouchers who pay no taxes at all, he saw it necessary to take into consideration the difference between the two, for the first were accustomed to paying the taxes imposed on them while the second had organised their investment on the basis that they would not pay any taxes on it. This was not convincing criticism, however. The only praise for the new tax system came from Mohamed Zaki Abdel-Qader, the author of the "Towards the light" column who praised the committee for directing the government's attention to a highly serious matter. This was that "taxes usually slide to squander and excessive public costs because they guarantee the treasury what it wants in terms of income, even if that means shouldering tax payers exorbitant burdens." Perhaps the warning the financial committee of the senate faced in this regard nearly 70 years ago stemmed from the notion that tax was a "tribute" to the ruler to spend as he pleased, a notion that has not yet disappeared.
