Tobacco tax: Egypt

E g y p tEgypt Tobacco tax: How does WHO recommend that tobacco is taxed, in general?1 To reduce the affordability of tobacco This reduces consumption of tobacco and improves public health. Domestic not customs Customs taxes are eroded in trade agreements and thus do not provide long-term revenue. Excise not general Excise tax raises the price of the taxed good relative to all other goods, which discourages its consumption. Specific not ad valorem Specific tax leads to higher prices and a lower market share of cheap cigarettes. In an ad valorem system, a minimum specific tax should also be implemented to guarantee minimum price and revenue levels. Uniform not differential Uniform tax leads to larger reductions in smoking as there is less opportunity to switch between different tiers and types of tobacco products. Comparable across all tobacco products Similar levels of taxation across products reduce tobacco consumption, rather than simply leading to shifts in consumption between different tobacco products. No duty-free allowances Duty-free sales increase tobacco consumption due to lower prices of products, and reduce tax revenue. Regularly increased Regular tax increases in line with gross domestic product (GDP) ensure that the affordability and consumption of tobacco products reduce. Specific excise tax decreases in real value if it is not increased in line with inflation. With tobacco tax revenue earmarked Ideally, tobacco tax revenue should be earmarked for particular health spending purposes, for example on tobacco control strategies. How has tobacco been taxed in Egypt?2 In July 2010, Egypt moved from a tobacco tax system with eight tiers of specific excise tax based on the retail price of cigarettes, to a mixed excise system introducing a uniform specific excise tax of LE 1.25 per pack and an ad valorem excise of 40% on retail prices. In 2014, three tiers of specific excise tax based on the retail price of a pack were introduced. Ad valorem tax remained at a uniform 50% of the market price of cigarettes. The amount of excise on each tier and the price definition of each tier have been increased regularly (see table). There is no excise specific tax on waterpipe tobacco in Egypt. The excise ad valorem tax is tiered for domestic and imported tobacco. In 1992, a specific amount was levied per stick to fund health insurance of students. In July 2018, a new health insurance contribution of LE 0.75 per pack was implemented. What does WHO recommend as the next steps for tobacco tax in Egypt? To reduce the affordability of tobacco Cigarettes remain very affordable in Egypt compared to neighbouring countries, and waterpipe tobacco has become even more affordable over the past 2 years. Uniform not differential Under the uniform tax system, total tobacco consumption reduced. However, under the tiered system introduced in 2014, total sales have increased, despite regular tax increases, due to product switching. Comparable across all tobacco products Waterpipe tobacco is not taxed as highly as cigarettes, and is even becoming more affordable over time. No duty-free allowances The duty-free sale of tobacco should be banned. 1 WHO technical manual on tobacco tax administration. Geneva: World Health Organization; 2010. 2 WHO’s series of reports on the global tobacco epidemic, 2009–2019. Geneva: World Health Organization; 2009–2019. © World Health Organization 2020 Some rights reserved. This work is available under the Creative Commons Attribution-NonCommercial-ShareAlike 3.0 IGO licence (CC BY-NC-SA 3.0 IGO; https://creativecommons.org/licenses/by-nc-sa/3.0/igo. WHO-EM/TFI/209/E Tobacco tax as percentage of retail price2 100 80 60 40 20 0 100 80 60 40 20 0 Taxes on 20g of the MSB of waterpipe tobacco 2008 2010 2012 2014 2016 2018 2014 2016 2018 Pe rc en ta ge o f r et ai l p ric e ( % ) Pe rc en ta ge o f r et ai l p ric e ( % ) Excise specific Excise ad valorem VAT Import duty Other tax Percentage of GDP per capita required to purchase 2000 of the MSB of cigarettes 2008 2010 2012 2014 2016 2018P er ce nt ag e of G D P pe r c ap ita (% ) 4 3 2 1 0 7 6 5 4 3 2 1 0 5 4 3 2 1 0 Retail price of a pack of 20 of the MSB of cigarettes (PPP) Retail price of 20g of the waterpipe tobacco (PPP) 2008 2010 2012 2014 2016 2018 2014 2016 2018 Re ta il pr ic e (P PP ) Re ta il pr ic e (P PP ) Djibouti Egypt Morocco Pakistan Sudan Tunisia 50 40 30 20 10 0 Government revenue from tobacco tax Eg yp tia n po un ds (b ill io ns ) Excise VAT Import duty 2007 2008 2009 2011 2013 2014 2016 PPP: purchasing power parity. Rates of specific excise tax over time Excise tax on cigarettes July 2014 February 2015 September 2016 November 2017 until present Ad valorem 50% of retail price 50% of retail price 50% of retail price 50% of retail price Specific (per pack of 20 sticks) ƒ LE 1.75 per pack for retail price < LE 9 ƒ LE 2.25 per pack for retail price ≥ LE 9 and < LE 15 ƒ LE 3.25 per pack for retail price ≥ LE 15 ƒ LE 2.25 per pack for retail price < LE 10 ƒ LE 3.25 per pack for retail price ≥ LE 10 and < LE 16 ƒ LE 4.25 per pack for retail price ≥ LE 16 ƒ LE 2.75 per pack for retail price < LE 13 ƒ LE 4.25 per pack for retail price ≥ LE 13 and < LE 23 ƒ LE 5.25 per pack for retail price ≥ LE 23 ƒ LE 3.5 per pack for retail price ≤ LE 18 ƒ LE 5.5 per pack for retail price > LE 18 and ≤ LE 30 ƒ LE 6.5 per pack for retail price > LE 30 Tax as a share of the retail price of the MSB of cigarettes has remained fairly constant in Egypt over the last 8 years. Tax as a share of the price of waterpipe tobacco has varied greatly over the last 4 years. The tax systems used for different tobacco products also vary greatly. Price and affordability2 The MSB of cigarettes in Egypt has become slightly less affordable over the last 10 years; however, the price is more affordable than in other countries. Waterpipe tobacco has become more affordable since 2016, and is more affordable in Egypt than in other countries. Revenue from tobacco taxation2 Tobacco tax revenue has increased in Egypt over the last 10 years, due to tax increases and increases in consumption since 2014. To have a win-win situation for both health and revenues in Egypt, it is recommended to merge tiers, implement a uniform tax and increase it regularly – to reap higher revenues, but also to reduce consumption and improve population health. Taxes on a pack of 20 cigarettes of the most sold brand (MSB)