Operation tax + spend
Higher tax revenues will be used to subsidize increased government spending in the coming fiscal year, Finance Minister Mohamed Maait said yesterday. The Finance Ministry expects tax receipts to grow 11-12% in FY2020-2021, which will allow the government to pay for an increase in wages over the coming year, Maait told Asharq Business on the sidelines of a conference (watch, runtime 0:58).
Where’s the money coming from? Maait didn’t shed any light on how the ministry is planning to boost tax revenues. Cabinet said last month that the higher revenues will be underpinned by an expanded tax base and the rollout of electronic payment, and made no mention of changes to the tax code.
A mixed picture: The ministry has lowered its revenue expectations for the year ahead, and now thinks it will take EGP 150-160 bn less than EGP 1.3 tn figure in the draft budget released last month, said Maait, who blamed revenue shortfalls in the tourism and aviation sectors. Despite this, overall revenues are still forecast to rise by 15% during the year, he added.
A EGP 420 bn-shaped hole: The ministry has lost out on EGP 200 bn in revenues during the current fiscal year due to the pandemic, Al Arabiya reported Maait as saying during the conference. This puts the total shortfall caused by the pandemic over the past two years at some EGP 420 bn — more than a third of the total revenues the government expected to take over the course of the current fiscal year.
GDP growth is expected to slow to 2.8% in FY2020-2021, compared to 3.6% the previous fiscal year, the minister said. This puts predictions at the lower end of the 2.8-3.5% growth range previously announced.
ALSO FROM THE CONFERENCE –
The government’s FY2020-2021 export subsidies are set to breach EGP 25 bn, Hapi Journal reports Trade Minister Nevine Gamea saying at the same industry event. Representatives from Export Councils met yesterday with the ministry to put the final touches on the new program. The government had allocated EGP 7 bn towards subsidy payments in its FY2020-2021 budget, up from EGP 6 bn the year prior. The Export Subsidy Fund has been paying out EGP 600 mn in arrears per month, in an attempt to settle overdue payments within three years.
An additional export subsidy scheme focusing on projects in the Suez Canal Economic Zone, Upper Egypt and the border governorates is planned for the coming year in cooperation with the Finance Ministry, Gamea said. The minister also said manufacturers could expect government support to cover shipping costs of their goods to African markets, as part of a government led strategy to expand exports to the continent.