Egypt to introduce new taxes on foreign travel and entertainment to shore up state finances

Egypt will next week introduce a host of new taxes affecting a variety of items and services, including entertainment, foreign travel, luxury food items and leisure activities.

The taxes proposed by the government were approved last week by the parliament’s budget and planning committee. They received preliminary approval on Sunday from the house’s plenary session. A final vote is expected to be taken on the measures later this week.

Adopting the new taxes is virtually a foregone conclusion as the house is dominated by government supporters.

It is the latest measure taken by the Egyptian government to tackle the cash-strapped nation’s deepening economic woes, made worse by the Russia-Ukraine war.

The Egyptian pound has lost nearly half its value over a little more than a year, inflation is soaring to about 30 per cent and a foreign currency crunch is depressing imports and undermining local industries dependent on materials produced abroad.

One of the region’s most indebted nations – owing at least $160 billion – Egypt’s economic prospects are mired in uncertainty, prompting international financial houses to downgrade its creditworthiness rating.

Fuelling the uncertainty is the slow pace of privatisation of state and military-owned enterprises as well as questions about whether it would be able to fulfil its foreign debt servicing commitments as well as its reluctance to allow a flexible foreign exchange regime. The Egyptian government is also yet to fulfil the conditions set by the International Monetary Fund to release a $3 billion loan it agreed to give Cairo late last year. The conditions include curtailing the role of the state and the military in the economy and allowing the private sector a bigger say.

The new taxes, which are expected to pay the treasury $5 billion annually, include charging 100 Egyptian pounds (about $3.3) when travelling abroad, a 3 per cent charge on duty free purchases with a minimum of $1.50, a 10 per cent charge on alcoholic beverages and a 5 per cent on fizzy drinks, with a minimum of 0.25 pounds.

They also include a 10 per cent custom duty on a variety of luxury items including shrimp, caviar, fresh or dried fruit, chocolate, electric shavers, hand and hair dryers, watches, lighters, coffee machines.

A new 5 per cent tax will also be charged on tickets in cinemas showing foreign films, 10 per cent on tickets for foreign circus shows and 20 per cent on scuba diving and its equipment.

In its pursuit of foreign currency, Egypt has recently decreed that foreign tourists buy train tickets in euros or dollars. Lights in major squares have been dimmed and the night-time illumination of state buildings cancelled to make more natural gas available for export.

President Abdel Fattah El Sisi, the architect of Egypt’s economic policies, has been defending his government’s handling of the economy. He faces criticism for spending billions of dollars on mega infrastructure projects and cities, including a new capital.

Critics contend that many of these projects are either unnecessary or could have waited and that the money would be better spent on battered sectors such as health care and education.

Mr El Sisi says the projects were desperately needed to modernise the nation of 104 million and prepare it for the inflow of more investment.

The proposed taxes await a final vote after receiving the nod of the parliamentary committee and plenary session