(Adds context, investor comments)
By Nadia El-Gowely and Ehab Farouk
CAIRO, July 1 Egypt's president approved a law
on Tuesday imposing a new 10 percent tax on capital gains and
stock dividends, as the country seeks to revive an economy
battered by more than three years of political turmoil.
The tax applies to dividends and capital gains made from
trading stocks on the Egyptian stock market as well as unlisted
"(This) comes in response to the major challenges which the
Egyptian economy has faced which demand coordination of all
efforts to protect and rebuild confidence in it," a statement
from the presidency said.
Egypt, which has relied heavily on aid from Gulf Arab allies
in the past year, needs to implement broad economic reforms in
order to revive its economy, which saw a drop in foreign
investment and tourism after the 2011 uprising.
The government is trying to boost state revenues without
The tax on stock market gains, which authorities announced
in May, was watered down last month after the bourse recorded
its biggest daily drop in almost a year.
Finance Minister Hany Dimian has estimated that the tax
would raise between 3.5 and 4.5 million Egyptian pounds.
New President Abdel Fattah al-Sisi signed the law after
passing a budget this week for the 2014/15 fiscal year that
seeks to reduce the deficit to 10 percent of gross domestic
product by curbing spending on energy subsidies.
Traders reached on Tuesday, a bank holiday in Egypt, said
they were nervous that the law could hit the stock market when
it opened on Wednesday.
"We got a shock before and we saw the effect," said Karim
Abdelaziz al-Ahly Fund & Portfolio Management, referring to last
month's losses after the stock market tax was announced.
One investor called the new taxes an "investor's bogeyman."
"The problem is not trading tomorrow or the day after ...
the problem is with new investments. Will the taxes attract
investment or repel it?" said Ehab Rashad of Mubasher for
The new law stipulates that the capital gains tax can be
reduced to 5 percent in certain circumstances, including if the
taxpayer owns 25 percent or more of the company.
Profits from stock market transactions in Egypt were
It was not immediately clear when the new measures would
(Writing by Stephen Kalin, editing by John Stonestreet and Hugh