Egypt parliament approves tax increase on cigarettes

Gamal Essam El-Din , Tuesday 21 Nov 2017

Finance minister Amr El-Garhy said the increase aims to reduce the budget deficit and generate revenues necessary for social protection programmes

Egyptians smoking
File Photo: An Egyptian man smoking a cigarette (Photo: AP)

Egypt’s parliament voted on Tuesday in favour of an amendment of the Value Added Tax (VAT) law that increases the tax on cigarettes and other tobacco products.

The amendment to Law 67/2016 was quickly approved by the Budget Committee in an urgent meeting on Tuesday morning.

A government document explaining the reasons behind the amendment said that the bill was submitted to parliament after consultation with "all concerned parties" and is in line with the 2017/18 state budget, which aims to close the gap in the budget deficit and keep it within safe limits.

The document also said that the revenues expected from the increase in cigarette prices will be used to spend on social protection programmes such as a new national health insurance system.

The note said that "the maximum prices of two kinds of cigarettes will be increased at different rates."

“The price of the first kind – which is sold at less than EGP 18 – will be increased by EGP 3.50 per pack; the price of the second – which is sold between EGP 18 and EGP 30 – will be increased by EGP 5.50, and the price of the third – which is sold at more than EGP 30 – will be increased by EGP 6.50.”

The note said that the VAT on different kinds of tobacco products (such as the popular shisha tobacco) will be increased to 175 percent instead of the current 150 percent.

Minister of Finance Amr El-Garhy told the Budget Committee that the increase is expected to generate between EGP 7 billion and EGP 8 billion in revenues.

“This amount is necessary to be able to financially cover the implementation of the new national health insurance system,” El-Garhy said.

"I approve of this law, although it was submitted very quickly," MP Mohamed El-Husseini said. "But I hope that the government will really use this revenue to implement the new national health insurance project."

Mohamed El-Sewedi, head of the pro-government Support Egypt parliamentary bloc and chairman of the Federation of Egyptian Industries, said he welcomes the increase because it will be used in implementing social programmes.

"Ordinary citizens should reduce spending on cigarettes because they are very bad for their health," El-Sewedi said.

"The increase in cigarette prices is necessary because this is part of the economic reforms we agreed on," MP Saad El-Aboudi said. 

MPs Ayman Abul-Ela and Ihab El-Khouli objected to the law, arguing that it could negatively affect poor families whose members smoke cheap local cigarettes and other low-priced tobacco materials such as shisha.

Parliament speaker Ali Abdel-Aal, however, said that "despite this increase, Egypt is still the cheapest in cigarette prices."

The quick and sudden submission of the bill for a vote came after Prime Minister Sherif Ismail paid a surprise visit to parliament on Tuesday morning to discuss the increase with speaker Abdel-Aal.

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