Egypt’s Finance Ministry agreed to a
stock market demand that listed companies be exempt from a
proposed tax on dividend payments, Egyptian Exchange Chairman
Mohamed Abdel Salam said in a telephone interview today.

The bourse argued that the tax would deter investors and
discourage companies from going public, Salam said .

“We convinced them by showing the numbers,” he said.
“The 400 or 500 million pounds ($67 million to $84 million) the
tax was going to bring in would be outweighed by the detrimental
effect on investment. This exemption will encourage people to
invest in the bourse and companies to go public.”

Last week, Egypt unveiled a capital gains tax on dividends
and higher corporate tax for the fiscal year starting next
month, to rein in the budget deficit. The country’s transition
government is raising subsidy spending and state employees’ pay
to meet demand for improving living standards. A revolt ended 30
years of rule by former resident Hosni Mubarak in February.

The exemption will apply to the 228 companies listed on the
exchange, Salam said. The country’s benchmark EGX 30 Index (EGX30) of
stocks, last month’s 10 percent gain in which made it the
world’s third-best performer, was down 0.7 percent at 5,408.66
at 12:22 p.m. in Cairo. It retreated 2.7 percent on June 2, the
first trading day after the government’s tax announcement.

To contact the reporter on this story:
Ahmed A Namatalla in Cairo at
anamatalla@bloomberg.net

To contact the editor responsible for this story:
Inal Ersan at
iersan@bloomberg.net