CAIRO (Updated) - Egypt's benchmark Index EGX30 tumbled 2.65 per cent down at 5,361.8 points Thursday, after the Cabinet announced a new capital gains tax and an increase in income taxes as head of the market criticised the move, pledging to fight against it. "The news about capital gain taxes that were addressed on Wenesday in the budget meeting shocked the market," Youssef Kamal of Naeem Holding said. Of 184 listed stocks, 24 gained and 150 declined. The total market turnover was LE715,253 million. The income tax increase applies to companies earning more than LE10 million ($1.68 million). The benchmark index .EGX30 fell 2.65 per cent. Chairman of the Stock Exchange Mohamed Abdel Salam criticised the capital gains tax, saying he would forward a memorandum againt it to the Supreme Council of the Armed Forces. "I see that the imposition of the tax is very harmful to the market at such a time and could be applied at another time," Mohamed Abdel Salam told reporters. Abdel Salam's remarks were so positive that investors began broad sales reducing losses from 3.3 per cent by midday to 2.65. "Everyone should know that the tax decision is not final and that the exchange will send a memo to the Cabinet," he said. "A meeting was held Thursday between the Prime Minister and businessmen to discuss the capital gains tax decision. Abdel Salam denounced the law for its “inappropriate” timing and vowed to fight its approval. “I won't give up,” said Abdel Salam. “If this law is going to damage the Egyptian market and its investors, I will continue to express my concerns.” “The imposition of this new tax is going to be very harmful to the Egyptian market at this time,” he said. “It could have been applied later when the market is actually doing well, that way investors could stand to pay a little extra tax, but imposing it now is not good.” Ashraf el-Sharqawi, the head of the Monetary Supervisory Authority, said his body would forward its opinion about the new tax after getting details from the Finance Ministry and reviewing the results of such a decision. "Whether this decision would help the economic system in Egypt or nor would be reviewed after results are reviewed thoroughly," said el-Sharqawi. While the new law may have a negative impact on current investments, experts say that in the long run, it might actually boost the market. Finance Minister Samir Radwan announced the set of measures as a way to raise revenues as Egypt faces a higher budget deficit for the coming fiscal year, forecast at 10.95 per cent of GDP. The minister also set a minimum wage of LE700 with a plan to raise it to LE1,200 within five years.
