Egypt raises taxes, fuel prices after government wage hike

Egypt's government increases taxes and fuel prices to pay for hike in public sector wages

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Under the new legislation, the parliament gave Mubarak's government the green light to raise taxes, reduce subsidies on fuel, increase prices of cigarettes and remove tax breaks from heavy industry to pay for the raises.

The debate over the measure lasted six hours and passed after howls of protest from the opposition, which holds about a fifth of the 454 seats in the legislature.

Parliament Speaker Ahmed Fathi Sorour said 297 lawmakers endorsed the measure, meaning not all members of the ruling National Democratic Party, which dominates the chamber, supported it.

The increase comes as rising food prices have severely affected Egyptians of all social classes. Violent demonstrations north of Cairo in early April resulted in three deaths and 11 people have died the last two months in clashes while waiting in line to buy subsidized bread.

Under the plan, the price of certain grades of gasoline and diesel, used by most forms of public transportation, will go up between 40 percent and 50 percent. Natural gas prices, used by most Egyptians for cooking as well as by factories, will increase 58 percent

The cost of cigarettes, a necessity for many in this country of heavy smokers, will increase 10 percent.

The bill, aimed at raising $3.6 billion, will also impose higher licensing fees on cars and end tax breaks for certain heavy industries, including those in special economic incentive zones.

Prime Minister Ahmed Nazif said the move will not "put any burden on the low income" people.

Mubarak ordered government departments on Wednesday to raise the salaries of all government and public sector employees, a significant chunk of the work force, by 30 percent.

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