For the fourth time since the beginning of the year 2024, cigarette prices have increased in Egypt in implementation of the provisions of the value-added tax and its amendments, and the provisions of 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 disclosures submitted to the Egyptian Stock Exchange.
Cigarette prices have witnessed 4 increases since the beginning of the year. The first was in February, then in April following the Central Bank of Egypt’s decision to float the pound, which saw the dollar exchange rate rise from 31 pounds to about 50 pounds. The third increase came last July, and the fourth on November 5.
The number of smokers in Egypt is estimated at 18 million people, representing 16.8% of the total population, according to a survey conducted by the Central Agency for Public Mobilization and Statistics during the fiscal year 2021/2022.
According to a previous report issued by the company, Egyptians’ cigarette consumption reached about 70 billion cigarettes during the fiscal year 2021-2022, and cigarette prices witnessed successive increases over the past two years.
Price list
The Eastern Tobacco Company (Eastern Company) announced the new price list for all its cigarette products, including Cleopatra cigarettes and others, and began implementing the increase as of Tuesday.
The company set the price of a pack of Cleopatra cigarettes at 38.75 Egyptian pounds (0.79 US dollars), an increase from 34.72 pounds. The value of the new increase ranges between 4.25 and 5 pounds per pack (20 cigarettes), depending on the type of item. The amendments include expanding the segments of cigarette prices subject to taxes, while raising the maximum segment by 12% annually over a period of 5 years.
According to the new regulations, the price of a box of cigarettes (10 cigarettes) reached 27 pounds, an increase of 2.5 pounds, while a pack of Cleopatra cigarettes of various types, such as: King Size, Soft Queen, Box, Super, Boston, Belmont, Black, Mondial, and Matossian. Super, 38.75 pounds, an increase of 4.25 pounds per box.
As for Viceroy/Palmall cigarettes, the price of a pack rose to 60 pounds, an increase of 5 pounds, while the price of a pack of Marlboro Crafted cigarettes reached 74 pounds, and a pack of Marlboro cigarettes reached 84 pounds. As for L&M cigarettes of all kinds, their price reached 64 pounds per pack.
What are the reasons for the increase?
The company explained that this increase comes to absorb part of the increase in manufacturing costs, resulting from the change in the exchange rate of the dollar against the Egyptian pound, which led to an increase in the prices of raw materials, whether tobacco or non-tobacco, and an increase in the cost of shipping as a result of the current logistical conditions.
Hani Aman, CEO and Managing Director of the company, said that the increase in cigarette prices was due to the increase in production costs, with the increase in prices and costs of shipping raw materials as a result of the regional situation.
He pointed out in press statements that the percentage of 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 reaches 70%.
Aman added that the company increased its production capacity, which led to an increase in supply in the market. He explained that this price increase is the minimum that can be avoided to avoid losses, stressing that companies usually make raising prices their last decision to avoid losing customers.
In a related context, Aman previously revealed that the company produces about 7 billion cigarettes per month, noting that the volume of cigarette consumption in Egypt amounts to about 95 billion cigarettes annually.
For his part, Ibrahim Embabi, head of the Tobacco Division in the Food Industries Chamber of the Federation of Egyptian Industries, explained that raising cigarette prices aims to reduce the black market phenomenon, as the difference between the price of a pack in the official and unofficial market was up to 6 pounds.
He stressed, in a statement, that implementing the new price increase will contribute to reducing this difference, especially with the increase in supply in the markets and the decline in consumers’ purchasing power.
Taxes and health insurance
The Eastern Tobacco Company (Eastern Company) approves a 12% increase in cigarette prices, in implementation of the provisions of the value-added tax and its amendments, and the Comprehensive Health Insurance System Law No. 2 of 2018.
Last April, the Egyptian Tax Authority decided to amend the price brackets for cigarettes with an increase of approximately 12%.
Embabi explained that the first category cigarettes now range between 1 and 34.7 pounds, after they previously ranged between 1 and 31 pounds. As for the middle category, it now ranges between 34.8 and 50.40 pounds, after it was between 31 and 45 pounds.
In November 2023, the government amended some provisions of the Value-Added Tax Law on Cigarettes promulgated by Law No. 67 of 2016, allowing the official prices of cigarettes to increase by no less than 12% annually. The amendments include increasing taxes on cigarettes by raising the minimum and maximum price limits for packs by 12% annually over a period of 5 years.
The draft law also included an increase in the table tax by 50 piasters on the three price brackets, so that the amount of the tax became 450 piasters on cigarettes whose price is less than 31 pounds, 700 piasters on cigarettes whose prices range between 31 and 45 pounds, and 750 piasters 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 collect 8 billion pounds from approving this increase in cigarette taxes during the year 2023.
As for the Comprehensive Health Insurance System Law No. 2 of 2018, it stipulates that 75 piasters be collected from the value of every pack of cigarettes sold in the local market, whether local or imported, provided that this value increases every 3 years by 25 piasters, reaching 150 piasters. A penny, to finance the health insurance system in Egypt.