Egypt’s Economic Woes: The Real Solution Lies in Eradicating Corruption, Not Raising Tax Rates
Cairo - A New Report Suggests a Different Approach
As the Egyptian government struggles to boost its tax revenues and curb corruption, a new report suggests that the real solution lies not in raising tax rates, but in eradicating corruption and promoting digitalization.
The Root of the Problem: Corruption
According to the World Bank’s enterprise surveys, 68% of Egyptian companies cite corruption as a major constraint on their activities. The widespread use of cash, lack of financial inclusion, and fraudulent accounting practices have created an environment conducive to tax evasion and money laundering.
What’s Being Done to Combat Corruption?
The government has taken steps to combat these issues, including:
- Introducing a national payment system
- Digitizing the tax filing system
- Setting up a Government Fiscal Management Information System (GFMIS) to track payments to government entities
However, experts say that more needs to be done to tackle corruption at its root.
The Way Forward
“The problem is not just about raising tax rates, but about creating an environment where businesses can thrive without fear of corruption,” said Maged Ezzeldeen, Country Senior Partner and Deals Leader at PwC Egypt. “The government needs to focus on eliminating regulations that facilitate corrupt practices.”
Ezzeldeen also emphasized the importance of learning from other countries’ mistakes, such as India’s attempt to remove 86% of its currency from circulation in November 2016.
A Culture Shift Towards Transparency and Accountability
Egypt’s Vision 2030, which aims to transform the country into one of the region’s leading nations, relies heavily on digitalization and financial inclusion. However, experts warn that unless corruption is tackled head-on, these efforts will be futile.
“Digitalization is key to unlocking Egypt’s economic potential, but it requires a culture shift towards transparency and accountability,” said Ezzeldeen. “The government needs to ensure that its digitalization efforts are accompanied by robust anti-corruption measures.”
The Need for Greater Financial Inclusion
Only 12% of firms surveyed claim access to financial instruments, leading to a culture of cash-based transactions and informal economic activity.
Conclusion
While digitalization is a crucial step towards unlocking Egypt’s economic potential, it is not a silver bullet. The government needs to address the root causes of corruption and financial exclusion if it wants to achieve its Vision 2030 goals.