May 20, 2020 / 4:06 PM / 12 days ago

UPDATE 1-Egypt to take 1% from salaries due to coronavirus

(Adds detail, background)

CAIRO, May 20 (Reuters) - Egypt will deduct 1% from people’s salaries for 12 months beginning on July 1 to offset the economic repercussions of the coronavirus, according to a draft law approved by the cabinet on Wednesday.

The tax will be imposed across all sectors of the economy in both the public and private sectors for net monthly salaries exceeding 2,000 Egyptian pounds ($127), the cabinet said in a statement. A tax of 0.5% will be deducted from state pensions.

The measure comes as Egypt tries to deal with the economic impact of the pandemic, which has brought tourism to a standstill, triggered major capital flight, and threatened remittances from Egyptians working overseas.

Revenues from the salary tax will be used to support organisations and workers hit by the fallout from the virus, as well as for direct support to some citizens and funding for the medical sector, the cabinet said.

Those affected economically by the outbreak may be exempted from the tax.

Egypt has confirmed more than 13,400 coronavirus cases, including more than 650 deaths, and on Tuesday saw its biggest rise in daily cases to date.

The government has received nearly $2.8 bln in emergency financial support from the IMF to help close a balance of payments gap caused by the coronavirus, and is in talks with the fund over a standby loan.

GDP growth stood at 5% in January-March, down from a forecast of 5.9%, the cabinet said. The government has forecast that it will drop to about 1% in April-June. ($1 = 15.7700 Egyptian pounds) (Reporting by Moamen Said Atallah; Writing by Aidan Lewis; Editing by John Stonestreet and Giles Elgood)

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