August 5, 2007 -- The Algerian government has announced tax decreases in an effort to spur foreign investment and increase collections from domestic companies that regularly evade taxation. The changes will reduce both individual income tax (IRG) rates and corporate profit tax (IBS) rates and also include a 1.5% reduction in interest rates for credit investments. Economic partners and trade-union organisations have welcomed the measure.

In a statement to Magharebia, President of the Forum of Company Directors (FCE) Rédha Hamiani praised the Algerian government for what he called a "commendable initiative".

"Foreign traders often complain of the heavy tax charges," said Hamiani. "The time has come for Algeria to join in what is being done in neighbouring Maghreb countries, notably in Morocco and Tunisia, where the charges on IRG and IBS are frankly more appealing… The government is quite simply going to liberate direct foreign investment."

According to Hamiani, tax reduction is also a good way to reform the informal market, which eats away at the national economy. According to statistics released by the Ministry of Finance, 40% of Algerian companies do not declare their revenue because they believe the taxation rate is too high.

Rachid Ait Ali, national secretary of communications at the General Union of Algerian Workers, described the decision as "revolutionary and historic". Ait Ali said that the tax reductions will compliment measures to stabilize public debt which President Bouteflika announced on July 5th.

Economist Malek Serrai told Magharebia that the "slight financial improvement due to the price of petrol must incite the government to boost the national economy though initiative measures," including "the acceleration of financial reform and regulation of the problem of industrial real estate, without omitting good governance".

According to Ait Ali, the Algerian citizen will also win out from the measures. "The lowering of taxes will favour a gradual reduction in the unemployment rate," he said.

Those with jobs are more concerned about how the measure will affect the overall economy. "The increase of the SNMG (guaranteed minimum national salary) in 2006 did not have a single positive effect on citizens' buying power because the same IRG tax rate was preserved," said teacher Abderrahim Alimi. "With the announced decrease, salaried workers are going to have to assess the revision of salaries," he added.

The lower taxes are set to go into effect in October.