Despite its efforts to achieve toward social justice, Finance Minister Hany Qadry Dimian says interest groups are systematically fighting the estate tax.
The minister pointed to studies showing the tax would have little to no effect on the low or medium income brackets as only about 10 percent of all housing units in Egypt would be subjected to the tax, and that it would not exceed a thousandth of the annual value of a property, which is one of the lowest tax rates in the world.
He said housing units worth less than 2 million are fully exempt from the tax and those worth LE5 million would only pay LE3,500 a year, or LE291 per month.
“Our estimate is that 95 percent of the family real estate units will be exempted because they are either old or worth less than LE2 million,” he said.
"Fifty percent of the tax revenue would be allocated for the development of slums, which means income would be redistributed from higher to lower for the benefit of everyone," he explained.
On controlling public funds, he said the ministry is applying a mechanization system for all government payments, including customs, taxes and wages, pointing out that once the system is completed, it would save between LE3 billion and LE4 billion due to more efficient management of these funds.
“We sent three million letters of notification so far,” he said, adding that those notifications are not meant as tax assessments but rather as a checklist of family residences.
“This tax is applied in many countries around the world,” he said. “Only elsewhere, it is much higher than in Egypt.”
He pointed out, that the tax reform is part of an overall system to achieve social justice, as it is applied in an ascending manner so as to be consistent with what is applied in the rest of the world. “The Egyptian tax system has always been like this and was ascended more with the recent reforms,” he said.
The government expects to collect around LE3.5 billion (roughly US$489 million) in revenues from this tax to reduce the budget deficit.
Meanwhile, according to the budget for the FY14/15, the budget deficit is estimated to sit at LE240 billion, which represents 10 percent of GDP, compared to 14 percent of GDP in the case no reform measures were incurred.
