Government to propose cigarette and alcohol tax hike

Ahmed A. Namatalla
5 Min Read

Plan to finance LE 1 billion of LE 8 billion needed for universal healthcare coverage

CAIRO: The government plans to introduce a bill to the People s Assembly to raise cigarette and alcohol taxes by as much as 20 percent to help finance universal health insurance as promised by President Hosni Mubarak during last year s election campaign, several government sources revealed.

The state expects the proposed increase to bring in about LE 1 billion annually. The government estimates its current healthcare budget of LE 8 billion needs to be doubled in order to finance a universal healthcare system and raise the standards for services being offered now at government hospitals. Other possible tax increases may be implemented in vehicle licensing, road tolls and cement factories, a source in Prime Minister Ahmed Nazif s office says.

But any increase in cigarette taxes will have to be negotiated with state-owned Eastern Tobacco, which owns a monopoly on cigarette production, and debated on the floors of the People s Assembly and Shura Council, a process likely to take months, the source says.

Still, Mohamed Sorour, head of the technical office of the Egyptian Tax Authority (ETA), denies ETA has any plans to raise taxes on commodities or services. Any talk of increasing taxes contradicts ETA s efforts to reduce taxes and increase total revenues, he adds.

A Ministry of Finance official was not immediately available for comment.

Madiha Khattab, head of the National Democratic Party s (NDP) Health Committee and former Cairo University Dean of the Faculty of Medicine, says the plan has been under consideration by the party for years but has been often met with political opposition. The public, on the other hand, seems to support the idea, as in other countries where the plan has worked.

The costs of healthcare are very high, no doubt, if you want to provide a good service, says Khattab. The logic is to implement taxes on practices that are harmful to health. When a person smokes and they get sick down the line, they will have to rely on health insurance that they ve already paid for in taxes. Most people, I think, support that line of thinking.

Khattab says the party hopes to introduce legislation to Parliament by the end of the current round. The proposed bill asks for cigarette taxes to be increased from LE 0.10 to 10 percent of the price of local and imported cigarettes. She says the most important step is introduction to Parliament for debate, after which, the government will show flexibility in discussing possible means of implementation.

When people say cigarettes help people deal with everyday problems and they re a strategic commodity, it s nonsense, says Khattab. The fact is, cigarettes are harmful to your health. And We re not talking about a massive increase in price, just a symbolic one which will not be felt by the individual. But collectively, the increase can make a difference.

Khattab says the proposed 10 percent tax hike is expected to bring in LE 500 to LE 600 million annually. She acknowledges the number is far short of what is needed for quality universal healthcare coverage, but says if the initiative is successful it would be the latest in a series of achievements by the government to improve healthcare services.

Over the past few months, we ve succeeded in raising public awareness of the importance of quality healthcare and the sacrifices that must be made to achieve that goal, Khattab says. If we re successful, the return will be great because we will service people s health.

According to Ministry of Health figures, Egyptians now pay for 60 percent of their healthcare costs out of pocket, up from 50 percent in 1990.

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