The government prepares to cut taxes on low-income employees by about EGP 7bn to limit the negative impact of recent reforms, the financial statement for the new fiscal year (FY) 2017/2018 revealed on Wednesday. The statement said that a tax deduction of 80% will be applied to those with low incomes, whose monthly income is estimated at about EGP 1,200, and by about 40% for middle-income groups. Amr Al-Monayer, deputy minister of finance for tax policies, said that the tax reduction will lower Egypt's tax revenues by about EGP 7bn in the next budget, but it is an important social step. Al-Monayer said that the current budget targets about EGP 603bn of tax revenues, adding that the new fiscal year will include raising the value-added tax (VAT) to 14%, adding about EGP 12bn, representing 0.3% of the gross domestic product (GDP). The financial statement showed that the Ministry of Finance tends to rely on external borrowing to finance the budget deficit, especially in light of high local interest rates. According to the financial statement, the government aims to achieve an initial surplus of 0.3% of the GDP, which represents the difference between expenditure and income, excluding interest, amounting to EGP 380bn. The next budget targets 9% of the total deficit, down from 10.5% in the current FY, and growth of 4.6% instead of 3.9% in the current FY, which will contribute to reducing the unemployment rate by 11%. The government aims to reduce the ratio of total debt to 95% of GDP, from 102% in FY 2016/2017. The government seeks to reduce petroleum product subsidies to 33% of the total allocations of subsidies in the next FY, estimated at EGP 330bn. The subsidies of petroleum products are estimated at EGP 110bn, while electricity subsidies account for about EGP 30bn. The funds allocated for social solidarity and solidarity programmes are set to rise to EGP 15.4bn in fiscal year 2017/2018, compared to EGP 10bn in FY 2016/2017. The new budget will allocate EGP 2.6bn for export aid to ease the burden on exporters, who contribute to increasing exports and raising the amount of foreign currency.
