Egypt president raises cigarette, alcohol prices

Published on NewsOK Modified: July 6, 2014 at 1:52 pm •  Published: July 6, 2014
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CAIRO (AP) — Egypt's president decreed an increase in sales tax on cigarettes, beer and wine, the latest in a series of price hikes that aim to ease the country's staggering budget deficit.

The decision announced Sunday increases a flat tax on local and imported cigarettes to between 25 and 40 cents per pack, depending on the brand. It doubles an already existing tax on beer, from 100 percent to 200 percent, and increases the tax on local and imported wines to 150 percent.

Since assuming the presidency last month, former military chief Abdel-Fattah el-Sissi has vowed to take tough decisions to deal with the country's battered economy, and bring it out of the bottleneck within two years.

Taking on one of the country's most explosive issues — its massive energy subsidies — his government partially raised fuel prices by up to 80 percent over the weekend. The decision came after the government announced it is gradually raising electricity prices.

Subsidies on basic food stuffs and energy eat up nearly a quarter of the state budget. Despite recommendations by international financial institutions to slash subsidies, no Egyptian leader has managed to broach the issue, fearing unrest in a country where nearly 50 percent of the population live in poverty and rely on government aid.

Speaking to the editors of Egyptian media outlets Sunday, el-Sissi said the decision to lift the subsidies was "50 years late" and described it as part of his efforts to set the country on the "correct" path. His comments were published by the state news agency.

The government has also introduced new property taxes, and plans to introduce a new scheme for value-added taxes. Defending the decision to partially lift fuel subsidies, the government said the move will free nearly $7 billion to be spent on health, education and salaries.

Previous loan talks with the International Monetary Fund since 2011 have centered on subsidy cuts and new taxation, but they faltered in part because governments feared social upheaval.

Early this year, the average minimum wage for public sector workers rose to $171 per month from a meager $50 per month, but it only applies to some 5 million out of Egypt's 27 million strong labor force. El-Sissi also set a maximum wage for government employees at about $6,000 per month.

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