A controversial tax on Egyptian Exchange (EGX) dividends and investment gains from takeovers will now be withdrawn, according to a government official.

In a TV interview Abdullah Shehata, advisor for the Ministry of Finance and head of the Economic Committee at the Freedom and Justice Party (FJP), said taxes on acquisitions, mergers and dividends  on the EGX will be cancelled.

“The Shura Council’s Economic and Financial Committee has decided to cancel tax plans for dividends and takeover gains,” said Shehata.

Shehata added that a single tax remains, the stamp tax duty, which will be applied at 0.001% per trade for both buyers and sellers.

Stock market experts had recently criticised the recent government decision to impose this tax on all EGX trades, saying it will have a disastrous impact on a market already suffering from a lack of liquidity and unstable performance.

The planned tax is a part of the modified economic reform programme put forward to shore up the budget deficit in order to obtain a $4.8bn loan from the International Monetary Fund.

“The market does not welcome this tax,” said Ossama Morad, CEO at Arab Finance Brokerage. “It reacted with an immediate drop, the investor has enough problems.”

Shehata stated that members of parliament had decided the taxes would have a “negative effect on the investment climate in Egypt”.

The Finance Ministry advisor said the cancellation will go into effect once the law is endorsed by the Shura Council, and that the 10% tax on Qatar National Bank’s acquisition of 100% of National Société Générale Bank’s shares will not be collected, confirming that any taxes already collected will be refunded to shareholders.

The Egypt Tax Authority had announced last month a 10% tax targeting profits generated via the QNB-NSGB deal. Head of Misr for Central Clearing, Depository and Registry Mohamed Abel Salam had announced that the tax would be “imposed on profits achieved by investors as a result the average difference between the buy and sell prices for the shares”.