Cabinet eyes taxes to offset wage hike

Business heads fear “disastrous effects"

A long-awaited draft law for upgrading the salaries of public sector employees was approved by Cabinet on Thursday, September 6. The bill was not referred to Parliament pending further Cabinet talks.

If the draft makes it through Parliament, some 200,000 civil servants will receive the raise. The bill is supposed to correct the pay scale for government employees and schoolteachers.

Employees are set to receive the pay raise with a retroactive effect since the beginning of July. The funds will be reimbursed in installments divided over five years.

The Cabinet approved a set of measures to secure partial funding for the raise. Among these were increasing the fees on the exploitation of coastal properties, raising the tax on interests on bank deposits, and increasing the tax on profits from real estate improvement. New measures also include charging an additional fee on construction permits, and imposing a fine on mobile phones for which customs fees have not been paid.

Private business leaders utterly rejected the new pay scale for civil servants. “The pay scale will have disastrous effects on the already in deficit Treasury, and on the national economy,” the economic associations warned. They also refused any new taxes on enterprises.

The increase in salaries will cost the Treasury an extra $1.1 billion each year. The Cabinet is seeking other means to raise more funds, including a 10 percent raise in the utilization coefficient of real estate, and reevaluating fixed assets.

Salaries, wages, and related benefits paid out by the government totaled some $3 billion last year, representing the second largest component of primary spending.

The 2013 budget, which the Ministry of Finance submitted to Cabinet last Friday, included the allocation required for amending the salary scale. It included most of the tax measures that were discussed by the Cabinet.


Reported by Hanadi Chami