Listed companies in Egypt are increasingly issuing bonus shares to avoid a tax on cash dividends, according to a government official and data seen by Reuters, dealing a blow to the country's drive to boost tax revenues.

In July 2014, Egyptian President Abdel Fattah al-Sisi approved a 10 percent tax on cash dividends on the stock market as part of his efforts to overhaul an economy battered by years of political turmoil.

The Cairo bourse had previously been exempt from taxes on dividends.

An official at the Egyptian tax authority told Reuters that companies were increasingly paying investors bonus shares - which are not subject to the tax - as a way of avoiding it.

"There are suggestions from the tax administration ... to address this issue but no decisions have been taken yet," the official added, speaking on condition of anonymity and declining to elaborate.

Data viewed by Reuters showed a 28 percent drop in the value of cash dividends paid out by companies on the Egyptian bourse last year to 9.83 billion Egyptian pounds ($1.26 billion) from 13.59 billion the year before.

Over the same period, the value of bonus share issues leapt by 124.5 percent to 4.51 billion pounds.

The government had also increased capital gains tax on the stock exchange by 10 percent, but postponed the rise for two years in May 2015 following protests by investors.

"The decline in cash dividends will continue annually but I expect that the tax will be cancelled soon because it does more harm than good," said Awa'el Securities analyst Wael Enaba, referring to the potential for the tax to deter investors.

There are around 270 firms listed on Egypt's bourse and Nile bourse. Shares on Egypt's bourse lost 70 billion pounds of their market value in 2015, with the main index falling 25 percent.