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121% growth in tobacco tax revenue over last five years - Daily News Egypt

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121% growth in tobacco tax revenue over last five years

Cigarette companies demand expansion of tax segments, but government ignores it


Cigarette sales is one of the largest tax sources for Egypt, and the government targets to achieve about EGP 58bn of tax revenues during the current fiscal year (FY).

The government has frequently increased taxes on cigarettes, during the past period, to finance different development programmes, most recently the comprehensive health insurance programme, which will be implemented during the current FY.

Cigarette products in Egypt are divided into three price segments. The first segment includes products up to EGP 18, with taxes of EGP 3.5, EGP 0.75, and 50% of the final selling price to consumer.

The second segment ranges between EGP 18 and EGP 30, with taxes of EGP 5.5, EGP 0.75, and 50% of the final selling price to consumer.

The third segment includes products priced over EGP 30, with taxes of EGP 6.5, EGP 0.75, and 50% of the final selling price to consumer.

The most prominent products in the first segment are Cleopatra Queen (Soft pack), Cleopatra King, Cleopatra Box, Target, and Mondial, while the second segment includes L&M, Rothman, Lucky Strike, Next, Pall Mall, Viceroy, Cleopatra Black Label, and Time. The third segment’s products are Marlboro, Dunhill, Merit, and Camel.

Tobacco tax revenue increased over the last five years by 121% to reach EGP 58.5bn in the current FY, compared to EGP 26.4bn for FY 2014/2015, representing 7.5% of total taxes, amounting to EGP 770bn, and 18.2% of total value-added taxes (VAT), amounting to EGP 320bn during the current FY.

The cigarette tax rate according to the financial statement of the 2018/2019 budget reached about 59.5% of the total tax table, amounting to EGP 98.4bn.

Mohamed Osman Haroun, chairperson of the Eastern Company, said that the three pricing segments of cigarette products allow different companies to compete in the presence of different prices.

He added that the recent ministerial decision on cigarette prices contributed to balancing financial burdens between the three segments resulting from the imposition of taxes and fees.

Foreign cigarette companies seek to modify the three segments to serve their interests, and each one has different proposals to reduce taxes on cigarette products.

Stephen Harvey, general manager of British American Tobacco Egypt, agreed with the stabilisation of cigarette prices so that consumers can have a variety of choices in all segments. He previously demanded increasing the limits of these segments to absorb the tax increases in the current FY, but the Ministry of Finance imposed the 75 piasters tax for the Comprehensive Health Insurance Law without any expansions in the segments.

The expansion of the three segments will allow moving a number of cigarette products from higher tax segments to lower ones, which will also reduce the final price for consumers.

Meanwhile, Japan Tobacco International called for maintaining the three-segment system and expanding each one of them.

There have been earlier demands to merge the cigarette tax segments into one or two segments, which could reduce pricing competition and benefit consumers of products with higher price segments, as they would pay the same taxes imposed on consumers of lower cigarette segments.

Topics: Revenue tax tobacco

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https://dailynewsegypt.com/2018/08/02/121-growth-in-tobacco-tax-revenue-over-last-five-years/
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