On June 29, 2025, the Egyptian House of Representatives approved significant amendments to the Value Added Tax (VAT) law, marking a pivotal shift in the country’s fiscal policy aimed at bolstering state resources and refining tax collection mechanisms. These changes, which focus on cigarettes, alcoholic beverages, and certain previously exempt services, are set to take effect starting November 2025, with the government emphasizing that essential commodities such as gasoline, diesel, and basic energy derivatives will remain unaffected by tax hikes.
The new legislation introduces a tiered pricing structure for cigarettes, both locally produced and imported, designed to increase the minimum and maximum price limits. For cigarette packs priced at 38.88 Egyptian pounds (EGP) or less, the maximum price will rise to 48 EGP. Those with prices ranging between 38.88 EGP and 56.44 EGP will see their minimum price set at 48 EGP and the maximum capped at 69 EGP. For cigarettes priced above 56.44 EGP, the maximum selling price will also be 69 EGP. Importantly, these price limits will be subject to a 12% annual increase for three consecutive years, starting November 2025, with provisions allowing periodic adjustments based on production costs and economic conditions.
This phased increase is part of a broader government strategy to enhance fiscal sustainability and control tobacco consumption, aligning with public health goals. As one lawmaker noted, the cigarette price increase will not exceed 50 piasters per pack, a modest rise that balances revenue generation without unduly burdening consumers.
Alcoholic beverages also face a significant taxation overhaul. The tax system will transition from a flat percentage rate to a fixed-rate system with progressive taxes based on the alcohol content of products. These taxes will increase by 15% annually over the next three years. This change aims to establish fairer pricing, discourage excessive alcohol consumption, and boost state revenues. The approach reflects a nuanced understanding of public health concerns, with lawmakers highlighting that beverages with lower alcohol percentages will incur lower taxes.
Beyond these consumer goods, the amendments bring previously exempt sectors into the tax net. Services provided by literary agencies and media event organizers will now be subject to VAT, as will crude oil, which was formerly exempt. Crude oil will be taxed at a 10% rate, but the government has reassured citizens that this tax will be absorbed by the Egyptian General Petroleum Corporation, the sole importer, ensuring that petroleum product prices remain stable and do not increase for consumers.
Members of the House of Representatives, during a session chaired by Counselor Dr. Hanafi Gebali, stressed the importance of protecting citizens from price shocks on essential goods. They emphasized that the amendments are targeted primarily at non-essential products and services, aiming to expand the tax base and improve collection efficiency without affecting the daily lives of ordinary Egyptians.
Deputy Head of the Planning and Budget Committee, MP Yasser Omar, elaborated on the reforms, highlighting that committed contractors who issue official invoices will benefit from reduced tax burdens, signaling a move toward structural tax reform. He also underscored the health rationale behind the alcohol tax changes and reassured the public that the cigarette tax increase is minimal.
MP Hanaa Farouk, also from the Planning and Budget Committee, pointed out that the law is part of a comprehensive effort to integrate the informal economy into the formal sector and expand the use of electronic invoicing. This modernization is expected to enhance transparency and tax compliance, critical steps toward sustainable fiscal management.
Parliamentarians consistently reiterated that the amendments aim to support the state’s general budget, which anticipates an additional 2.6 billion EGP in revenue without imposing undue hardship on lower-income citizens. The funds are earmarked to bolster vital sectors such as health and education, reflecting the government’s commitment to social development alongside fiscal reform.
Notably, the law’s passage coincided with calls for accountability in unrelated matters, such as a tragic incident involving young women in Menoufia, with MPs demanding government responsiveness and oversight, demonstrating the legislature’s multifaceted role in governance.
Experts predict that the cigarette price adjustments will gradually reshape consumption patterns, potentially reducing tobacco use over time while supporting government revenues. The progressive taxation on alcohol similarly aligns with public health objectives, discouraging excessive drinking through economic incentives.
These reforms form part of a broader vision for Egypt’s economic development, aiming to balance revenue growth with social responsibility. By targeting luxury and non-essential goods for higher taxation and safeguarding strategic commodities, the government seeks to maintain economic stability while enhancing fiscal capacity.
As the new VAT law takes effect, the Egyptian government and parliament will continue monitoring its impact on markets and consumers, ready to adjust policies as needed to ensure a fair and effective tax system that supports the nation’s long-term prosperity.
