On Monday evening, the government approved a social security package to ease the burden on low-income people and a segment of middle-income groups from the inflationary effects of economic reforms, notably the flotation of the pound, raising interest rates, hiking fuel prices, and application of the value-added tax.
Inflation, which can be described as price hikes, had jumped to historical record rates, registering 32.9% in April, with no salary increases.
The measures include raising pensions by 15% for 9.5 million people, with a mimum of EGP 130 applicable from the beginiing of July. The Takaful and Karama programme pension was also decided to increase by EGP 100 (30%) to serve 1.7 million people.
The government pays monthly pensions ranging from EGP 350 – 500 for the beneficiaries of Takaful and Karama programme. The number of beneficiary families are expected to reach 3.6 million families by the end of June.
The government also approved the granting of an exceptional cost bonus of 7% to public servants included under the umbrella of the public service law, with a minimum of EGP 65 and a maximum of EGP 130, next to a 10% bonus for public servants outside the public service law, with a minimum of EGP 65 and a maximum of EGP 130.
The government also approved the periodic allowance by 7% for public servants covered by the law and 10% for uncovered employees. The total periodic and special allowances to those who are engaged in the civil service law at 14% and uncovered employees by 20%.
The government also recognized an increase in the minimum tax exemption to EGP 7,200, up from EGP 6,500 per year, which means that public and private sector employees receiving up to EGP 1,138 per month are tax exempted.
The government has also approved a tax deduction, with a ratio of between 5% and 80%, according to income. This affects income segments that start from EGP 7,200 per year to EGP 200,000.
Amr El-Monayer, the deputy finance minister for tax policies, told Daily News Egypt that income is divided into four segments, the first up to EGP 7,200 annually, which is now tax exempted.
He added that the tax deduction will be applied to the segments that exceed the exemption limit, and includes the second tranche, and its income is between EGP 7,200 and EGP 30,000, which now pays a tax of 10%. This segment will receive a tax deduction of 80%.
This means that that segment will pay only 20% of the tax it is subject to. So if citizens included in this segment were supposed to pay taxes of EGP 100, they will now be paying only EGP 20.
El-Monayer explained that the third segment, which receives income of EGP 30,000 – EGP 45,000 are subject to a 15% tax and will receive a 40% deduction on that tax.
The fourth segment that receives income of EGP 45,000 – EGP 200,000 will pay a tax of 20%. This segment will receive a tax deduction of 5% and pay 95% of the tax they are subject to.
The government has not approved any deductions for people with annual income exceeding EGP 200,000. This segment is subject to a tax of 22.5% until now.
El-Monayer said that the decisions will make citizens more capable of facing the coming reforms.
Mohamed Moeit, the deputy minister of finance for general treasury affairs, said that the tax deduction amounts to EGP 7bn.
He explained that this amendment helps with social justice, where low-income citizens are subject to less taxes than high-income citizens.
The amendment increases the actual tax in accordance with the text of Article 38 of the Constitution, which provides for the imposition of progressive tax for individuals.
The government also agreed to collect a share of EGP 3bn to channel it to the state treasurry from the special funds accounts that amount to EGP 33bn, with the exception of funds for development and scientific research, and the funds that target health services, health and social care funds for workers, as well as social housing projects.