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State budget favors wealthy as lower-income groups continue to disproportionately shoulder tax burden
 
 

Parliament passed Egypt’s state budget for the fiscal year 2018/9, which will begin in July, on Tuesday. The budget targets a deficit of 8.4 percent of GDP, down from an estimated 9.8 percent at the end of the current fiscal year.

The tax structure in the 2018/19 state budget represents an imbalance in favor of the wealthiest and at the expense of lower-income citizens, amid an ongoing austerity program that has included the implementation of new taxes in recent years.

A real estate tax, which functions as a tax on the wealthiest, was implemented starting July 2014. A few years later, the government introduced the value-added tax, a regressive tax that weighs more on lower-income earners, who tend to use the bulk of their income on consumption-related purchases, than on wealthier individuals who have a larger capacity to save. In spite of this, this year’s state budget shows that the real estate tax and other property taxes remain a limited source of income for the government, while the share of VAT from total tax collections has grown.

This reflects an imbalance in tax justice, as the burden of financing government spending falls increasingly on lower-income earners. Property taxes, meanwhile, increased marginally as a share of total tax collection. Egypt’s state budget classifies land, building, t-bill and t-bond revenue taxes, property transfer fees and car fees as property taxes. The real estate wealth tax is classified under income tax.

The slight decrease in the share of total taxes paid by corporations, when compared with the incrementally increasing share paid by individuals and despite recent improvements in economic growth, further reflects the imbalance in the distribution of Egypt’s tax burden.

Corporate profit tax in Egypt’s budget reflects taxes collected from state-owned Egyptian General Petroleum Company, the state-owned Suez Canal Authority, state-owned public sector companies as well as private sector corporations.

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