Brotherhood will raise taxes, revise subsidies to curb deficit: FJP official
Freedom and Justice Party follows up election success by unveiling plans for tax shake-up and repricing of exports
Ahram Online, Sunday 15 Jan 2012
Supporters of the Brotherhood's Freedom and Justice Party participate in a march in support of the party ahead of parliamentary elections (Photo: Reuters)
The Muslim Brotherhood's political party has said it will consider raising taxes in certain sectors, repricing energy exports and revising subsidies to control Egypt's budget deficit.
Tax laws will be revised to give labour intensive sectors such as spinning and weaving significant tax breaks, Ashraf Badr El-Din, head of the Freedom and Justice Party's (FJP) economic policy committee, told Al-Ahram daily newspaper on Saturday.
Commercial and rent-based sectors, on the other hand, will be subject to higher tax rates.
"Increasing income tax on telecoms by 10 per cent would lead to over a LE1 billion in extra tax revenues," Badr El-Din said.
A capital gains tax is also a part of the FJP's economic vision. Under its plan, a 3 per cent levy would be applied on Bourse profits for funds that last less than six months. A 2 per cent tax would be applied for funds exiting the market in less than a year while funds invested for more than year would pay 1 per cent.
Last June, Egypt's then finance minister Samir Radwan proposed a 10 per cent tax on stock dividends. The bill was cancelled after it met strong opposition from the business community.
Badr El-Din also explained that the FJP will look into the prices of raw materials, especially natural gas and oil, exported to Israel.
According to Badr El-Din, a revision of prices could bring in an extra $18 billion in revenues per year.
Egypt is reported to be in negotiations with Israel and Jordan to set new prices for gas exports to the two countries.
Last October, the petroleum minister said the new price it had agreed for gas exported to Jordan was just above US$5 per million per British Thermal Unit, more than double the previous price it charged the Arab state.
Existing agreements with Israel should be maintained as long as Israel also keeps to their terms, Badr El-Din said.
On Friday, Badr El-Din was reported as saying that the Brotherhood would not seek to end the Qualifying Industrial Zones (QIZ) agreement under which hundreds of Egyptian companies export products with Israeli components duty-free to the United States. Export volumes have been running at around $800 million annually.
When it comes to subsidies, Badr El-Din indicated that the in-kind system that is currently in place, where the poor pay reduced rates for staple goods, will be transformed into direct cash subsidies paid to those who need them.
Energy subsidies and export subsidies will also be revisited, he said, remarking that they only benefit the richer elements of society.
The Brotherhood also says it will impose minimum wage rates similar to those recently enacted by Egypt's government.
Badr El-Din said that the minimum wage will climb to LE1,200 ($200) in five years, which translates as LE700 today followed by 10 per cent annual increases.
The Islamist movement, which is expected to have a big say in Egypt's policy over the coming four years, earlier indicated that it would consider supporting a deal to obtain emergency aid from the IMF.
"There is no objection to borrowing. But it must be without conditions. And it should be in accordance with national priorities," Badr El-had told Reuters on Thursday.
The FJP has won 233 seats in Egypt's new parliament, taking a 47 per cent share of the total.
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