Mr. Lotz, economist in the Fiscal Affairs Department, is a graduate of Copenhagen University. He was formerly with the Economic Consultant of the Danish Tax Department.
See Bent Hansen and Donald Mead, The National Income of the U.A.R., 1939-1962 (Institute of National Planning, Cairo, July 21, 1963).
Fiscal year July 1-June 30.
See José C. Sanchiz, “Money and Banking in the United Arab Republic,” Staff Papers, Vol. XII (1965), pp. 322-23.
If gross collections of social insurance premiums (including government contributions) are included in taxes on income, the relative importance of taxes on goods and services dropped to about 58 per cent by 1963/64.
Flexibility is defined as the increase in tax revenue as a percentage of the increase in GNP in the same period. Built-in flexibility is the same percentage, if it is assumed that the tax rates were unchanged in the period.
Total tax arrears (including agreed installment payments) accumulated for taxes on income and property are estimated to be about LE 90 million. To collect these arrears, it is planned to increase the number of tax collectors from 270 at the beginning of 1963/64 to about 470 by the end of 1965/66. About one third of total income tax collections in 1962/63 represented collection of tax arrears. It is estimated that the percentage has increased considerably since 1963/64.
See footnote 5.
Twenty per cent of the total value of exports of rice and onions is approximately LE 7-8 million.
The nationalization of enterprises was achieved by the issuance of negotiable bonds, which, at time of issue in 1961, bore 4 per cent interest, and were redeemable after 10 or 15 years.
Extra reserves would, of course, change the distribution described above. For example, if the revenue from the 5 per cent for government bonds is correct (LE 2.8 million in 1962/63, LE 3.3 million in 1963/64, and LE 4.5 million in 1964/65—see next paragraph in text), then net profit was LE 56 million in 1962/63, LE 66 million in 1963/64, and LE 90 million in 1964/65. Workers’ shares of LE 10.1 million in 1962/63, LE 11.9 million in 1963/64, and LE 16.8 million in 1964/65 then can be calculated at only 18 per cent of net profit in 1962/63 and 1963/64 and 19 per cent in 1964/65. This indicates that about 13 per cent of net profit was retained as additional reserves: I, net profit, 100 per cent; II, legal and additional reserves, 23 per cent; III, government bonds, 5 per cent; IV, workers’ share, 18 per cent; and V, profits tax, 22 per cent. The distribution was as follows: VI, shareholders’ share, 32 per cent; VII, Treasury’s share, 38 per cent; VIII, workers’ share, 7 per cent; and IX, own reserves, 23 per cent.
These estimates depend wholly on the assumption that 5 per cent of net profit is used by all enterprises to purchase government bonds. Some check on this can be derived from a comparison between the calculated profits tax and actual collections. Twenty-two per cent of the above-calculated net profits is LE 12.3 million for 1962/63 and LE 14.5 million for 1963/64, which compares with collections from corporations of LE 10.1 million in 1962/63 and LE 13.0 million in 1963/64. It would seem that the difference can be regarded as explained by the payment of arrears of taxes.
A study made by the Ministry of Industry shows that the rate of profit in the industrial sector declined from 1961/62 through 1963/64. This was caused by an increase in costs, met only in part by an increase in productivity.
GNP in 1962/63 was LE 1,680 million: of this, 27.8 per cent (LE 467 million) was derived from agriculture. In the Services Budget, revenue from the land tax was LE 9.8 million, from the defense tax LE 6.2 million, and from local land taxes LE 14.0 million, a total of LE 30.0 million. To this, of course, must be added the burden of indirect taxes, etc.
A scheme like this was in effect in Denmark for a number of years. The amount of subsidies paid to the municipalities to reduce the land taxes was regulated each year as a function of the average yield per acre in agriculture. This scheme required very reliable statistics.
The deductions under the general income tax in respect of schedular taxes are included in the total marginal rates, which are calculated as the sum of the marginal rates minus the product of the marginal rates. Let G represent the marginal rate for the general income tax, S the schedular tax (including defense), and T the total marginal rate. Then the tax on increment of income I will be dI·T = dI· (1 — S)G + dI·S so that T = G + S — SG. The calculations assume that only one schedular tax and no other direct taxes are paid.