Egypt's smokers to swell government's heathcare budget with tax rise

Egypt’s largest tobacco manufacturer raised the prices of cigarettes by 10-15 percent on Thursday, the company's chairman announced, following a tax rise designed to swell the government's healthcare budget.

The rise is the second price increase since November, when the Eastern Tobacco Company raised the price of a pack of 20 cigarettes by 22 percent. Before November, the cheapest pack of cigarettes was 11.5 Egyptian pounds (60 US cents). 

The new prices of cigarette packs in Egypt will range from 16 to 33 Egyptian pounds (US 90 cents to $1.80). 

The Eastern Tobacco Company has 70 percent of the cigarette market in Egypt.

Its chairman, Mohamed Osman Haroun, said on Wednesday that the increase in prices was a result of a new tax law approved by the president and ratified in December by the Egyptian parliament, which aims to raise money for the government's new comprehensive healthcare scheme.

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The controversial scheme is aimed at improving the quality of services in public hospitals while raising monthly insurance fees for citizens.

The law is said to be increasing health expenditure for low-income familites and violating the Egyptian constitution by allocating only 1.6 percent of GDP to healthcare instead of the 3 percent stipulated in article 18 of the constitution. 

The Finance Ministry informed tobacco companies on Wednesday that it was applying a new tax from Thursday to fund the healthcare plan, intending to take 0.75 pounds per cigarette pack.

The ministry plans to collect 58.5bn Egyptian pounds in revenues from the VAT on cigarettes in the current fiscal year 2018/19, up from 51.4bn pounds in the previous fiscal year.

The price rise includes locally produced cigarettes as well as imported ones, Haroun told MBC Masr TV channel on Wednesday.

The Egyptian government increased the prices of fuel, electricity, water and transport tickets in June as part of an economic reform plan agreed with the International Monetary Fund to reduce Egypt’s budget deficit and boost government revenues.

Egyptians consume 280 million cigarettes a day and 83 billion annually, according to Haroun.