Egypt plans 32 percent tax hike in 2024-25 fiscal year to meet IMF mandates

(MENAFN) Egypt plans to implement significant tax hikes in the upcoming fiscal year starting July 1, 2024, as part of austerity measures mandated by international lenders, including the IMF, in exchange for substantial financial aid amounting to over USD50 billion.

The draft budget for the fiscal year indicates a projected 32 percent increase in tax revenue, reaching 2 trillion Egyptian pounds (USD42 billion). Despite an adjustment in the income tax exemption threshold to 60,000 pounds, tax revenues from VAT and income taxes are expected to surge by 32.4 percent and 31.6 percent, respectively.

The depreciation of the Egyptian pound against the US dollar, resulting in higher revenue from dollar-denominated canal tolls, is anticipated to boost tax revenue from the Suez Canal. VAT revenue is projected to more than double over four years, reaching 720 billion pounds by 2024-25.

These tax increases, particularly VAT, may disproportionately affect lower-income households by reducing purchasing power and hindering the ability to afford essential goods. Additionally, higher income and capital gains taxes are forecasted, potentially impacting government employees, private sector workers, and corporate profits.

The projected increase in tax revenue for the upcoming fiscal year is driven by several factors. Firstly, there is expected to be a significant 52 percent annual rise in taxes collected from the Suez Canal, reaching 157.2 billion pounds compared to 103.7 billion in the current fiscal year. Additionally, taxes on government workers' salaries are set to increase by 26.4 percent to 170.6 billion pounds, and there will be approximately a 30 percent surge in corporate tax on oil companies and foreign partners.

Property tax revenue is also expected to see a notable increase, with a budgeted rise of 34 percent to 232.7 billion pounds. This increase is largely attributed to higher levies on government debt instruments and a 32.3 percent rise in vehicle and drivers' license taxes and fees.

Furthermore, taxes on cigarettes and tobacco are projected to climb by 21.4 percent to 410 billion pounds, while duty on carbonated and flavored water will rise by 25.8 percent to 8.2 billion pounds.

Taxes on essential utilities such as water, electricity, gas, and telephone contracts will also see a 25 percent increase, along with levies on gas, electricity, and butane gas consumption.

MENAFN28052024000045015839ID1108264893