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Monday, 15 July 2019

Cigarette prices in Egypt could rise in October on the back of a tax increase

EXCLUSIVE- Cigarette prices could rise in October on the back of a sin tax increase: The prices of cigarettes may climb in October after a Finance Ministry committee finalized a draft proposal which would raise the ceiling on the taxable price brackets and tack on an additional EGP 0.5 to the tax rate on the top two brackets, two government sources told Enterprise. The raised ceiling will allow tobacco companies to increase prices without their brands moving into a higher bracket, thereby allowing more room to raise prices before being subjected to a higher tax rate. The cabinet economic group has approved the amendments, the sources told us. Changes to the ceilings will be as follows:

  • The first bracket will be widened to include all cigarette packs sold in shops at less than EGP 20, up from a previous ceiling of EGP 18. It would still be subject to the old fixed tax rate of EGP 3.5;
  • The second bracket will include all packs sold at EGP 20-34, up from EGP 18-30. The tax for this bracket will rise to EGP 6 from EGP 5.5;
  • The third bracket will include all packs sold at more than EGP 34, up from EGP 30. The tax for the uppermost bracket will also rise to EGP 7 from EGP 6.5

What to expect: After the new ceilings are introduced, the companies are expected to announce price hikes over and above the EGP 0.5 tax increase on the two higher brackets. The added revenue from the new prices will contribute evenly to the revenues of both the company and the Tax Authority. The latter is expecting to net EGP 10-11 bn in additional revenues.

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