Abderrahmane Benkhelfa, Minister of Finance: Interview

Interview: Abderrahmane Benkhelfa

What are the major contributions of the Supplementary Finance Law of 2015?

ABDERRAHMANE BENKHELFA: The measures contained in the finance act are intended to mobilise new financial resources without increasing the tax burden, as well as to encourage and support businesses and domestic production in Algeria. Thus the Supplementary Finance Law includes several notable measures.

First, it introduces a differentiated rate for the corporate income tax which focuses on activities with high added-value that do not generate large margins. The second measure is the downward revision of the rate of the turnover tax. The third measure consists of granting tax advantages for the importation of accessories and components destined for use as part of assembly industries and processes such as complete knock-down. The fourth measure is an exemption from Customs duties and value-added tax (VAT) for certain inputs for the production of steel goods and extruded aluminium. This measure extends to soybean seeds, sunflower and maize with the aim of encouraging oil extraction from oilseeds and the production of oil cake. Finally, the last measure reduces the registration duty on the transfer of shares of companies that have received regulatory reassessments and the disposal of revalued assets.

What role will the Ministry of Finance play in encouraging economic diversification and helping to create national wealth?

BENKHELFA: With respect to the creation of national wealth, the hydrocarbons sector contributes about 35-45% of GDP, though this share has been declining over the course of the last decade. As a result of the anticipatory measures taken by the government since the beginning of the 2000s, Algeria is currently far better prepared to cope with external shocks.

The Ministry of Finance is making efforts to support diversification through the institution of tax and budgetary measures aimed at revitalising the petrochemicals, agriculture and tourism industries. Similar strategies have been applied to the ICT sectors.

In order to improve the business climate, the Ministry of Finance will continue, in coordination with other sectors and actors, to make the necessary changes needed to improve services related to increasing access to financing for small and medium-sized enterprises (SMEs), improving regulation and access to industrial land, and the facilitation of Customs clearance procedures.

This should be accompanied by reforms in the financial sector in order to boost the financing of businesses, the mobilisation of local savings and the financing of the economic sphere by the emergence of new instruments including private equity.

How would you interpret the evolution of inflationary pressures in 2015?

BENKHELFA: The control of inflation has always been a major preoccupation of the government, since inflation, when it exceeds a certain threshold, causes adverse effects on economic growth, employment, the purchasing power of households and the competitiveness of the economy.

The factors behind the increase in prices of agricultural products mainly concern the multiplication of intermediaries in the distribution network ( disruption of wholesale markets), the increased cost of agricultural inputs imported following the fluctuations of the Algerian dinar and the inclement weather that has hampered recent harvests.

Several fiscal instruments have been employed to contain inflation which resulted in indirect taxes added on to consumer prices, as well as direct taxation that impacted incomes. The exemption from VAT and Customs duties, or for some products the application of a reduced VAT rate of 7% and Customs duties of 5% has had a dampening effect on inflation.