Egypt’s Burning Issue: Cigarette Prices Skyrocket for the Fourth Time This Year – Uncovering the Smoke and Mirrors Behind the Hike
For the fourth time since the beginning of 2024, the price of cigarettes has increased in Egypt to implement the provisions of the Value Added Tax and its amendments and the Comprehensive Health Insurance System Law No. 2 of 2018.
On Tuesday, the Egyptian Eastern Company announced an increase in cigarette prices, after the company’s board of directors approved the decision, according to a disclosure submitted to the Egyptian stock exchange.
Cigarette prices have increased 4 times since the beginning of the year. The first was in February, followed by the Central Bank of Egypt’s decision to float the pound in April, which saw the exchange rate rise from 31 pounds to around 50 pounds to the dollar. The third extension was last July and the fourth on November 5.
According to a survey conducted by the Central Agency for Public Mobilization and Statistics in the fiscal year 2021/2022, the number of smokers in Egypt is estimated at 18 million people, representing 16.8% of the total population.
According to a previous report issued by the company, Egyptians’ cigarette consumption reached nearly 70 billion cigarettes in the 2021-2022 fiscal year, and cigarette prices have risen consistently over the past two years.
Price list
Eastern Tobacco Company (Eastern Company) has announced new price list for all its cigarette products including Cleopatra cigarettes and others and the increase will be effective from Tuesday.
The company has priced a pack of Cleopatra cigarettes at 38.75 Egyptian pounds (US$0.79), up from 34.72 pounds. The new increased value is 4.25 to 5 pounds per pack (20 cigarettes), depending on the type of item. The amendment expands the segment of cigarette prices subject to tax, while increasing the maximum segment by 12% annually over a 5-year period.
According to the new rules, the price of a pack of cigarettes (10 cigarettes) has reached 27 pounds, an increase of 2.5 pounds, while packs of different types of Cleopatra cigarettes, such as: King Size, Soft Queen, Box, Super, Boston, Belmont, Black, Mondial and Matosian. Super, 38.75 pounds, an increase of 4.25 pounds per box.
For Viceroy/Pamal cigarettes, the price of a pack rose to £60, an increase of £5, while a pack of Marlboro Crafted cigarettes rose to £74 and a pack of Marlboro cigarettes to £84. For all types of L&M cigarettes, their prices have reached 64 pounds per pack.
What causes growth?
The company explained that this increase came to absorb part of the increase in production costs, which resulted from the change in the exchange rate of the dollar against the Egyptian pound, which led to an increase in the price of raw materials, be it tobacco or non-tobacco, and the increase in shipping costs due to the current logistics conditions.
The CEO and managing director of the company, Hani Aman, said that the price of cigarettes has increased due to the increase in the cost of production along with the increase in the cost of transportation of raw materials due to the regional situation.
He noted in the press statement that the percentage increase in cigarette prices does not fully reflect the size of the increase in all production inputs, which have increased by about 60% since the liberalization of the exchange rate in March, especially since the percentage of the dollar component in cigarette production reached 70%.
Aman also said the company has increased its production capacity, thereby increasing supply to the market. He explains that this price increase is the minimum that can be avoided to avoid losses, stressing that companies usually make their last decisions to avoid losing customers.
In a related context, Aman previously revealed that the company produces about 7 billion cigarettes per month, noting that cigarette consumption in Egypt is about 95 billion cigarettes annually.
For his part, Ibrahim Mbabi, head of the tobacco department of the Food Industries Chamber of the Egyptian Federation of Industries, explained that the aim of increasing the price of cigarettes is to reduce the phenomenon of the black market, because the difference between the official and the price of a pack. The informal market was up to 6 lbs.
He stressed in a statement that the implementation of new price increases will contribute to reducing this difference, especially with the increase in supply in the market and the reduction in purchasing power of consumers.
Taxes and health insurance
Eastern Tobacco Company (Eastern Company) has approved a 12% increase in the price of cigarettes in implementation of the provisions of Value Added Tax and its amendments and the Comprehensive Health Insurance System Act No. 2 of 2018.
Last April, the Egyptian tax authorities decided to revise the price bracket for cigarettes with an increase of about 12%.
Mbabi explained that first class cigarettes now range from 1 to 34.7 pounds, whereas previously they ranged from 1 to 31 pounds. For the middle category, it now ranges from 34.8 to 50.40 pounds, up from 31 to 45 pounds.
In November 2023, the government amended certain provisions of the value-added tax law on cigarettes introduced by Law No. 67 of 2016, whereby the official price of cigarettes cannot increase by less than 12% annually. The amendments include raising the tax on cigarettes by increasing the minimum and maximum price limits for packs by 12% annually over a 5-year period.
The draft law includes an increase in the table tax by 50 piastres in three price brackets, so that the tax amounts to 450 piastres on cigarettes priced under £31, 700 piastres on cigarettes priced between £31 and £31. 45 pounds, and 750 piastres on cigarettes whose price exceeds 45 pounds.
According to the House of Representatives’ report on the draft value-added tax law, the Egyptian government aims to raise 8 billion pounds by 2023 from the approval of this increase in cigarette taxes.
As per Comprehensive Health Insurance System Law No. 2 of 2018, it stipulates that 75 piastres shall be collected from the value of each pack of cigarettes sold in the local market, whether local or imported, provided that this value increases by 25 every 3 years. . Piastre, reached 150 paisa for Egypt’s health insurance system.