Egypt’s stock market soars after halt of capital gains tax

CAIRO (AP) — Egypt suspended a capital gains tax on Monday, sending shares soaring after a months-long downturn in which investors had complained of a lack of clarity about the new taxes, with some even taking the government to court.

Immediately after the announcement, Egypt’s EGX 30 index rose 3.3 percent to 8562.07, according to Egypt’s official news agency. By late afternoon, shares were up 6.5 percent.

President Abdel-Fattah el-Sissi approved a law nearly a year ago which placed a 10 percent tax on capital gains, fueling a sell-off by investors in an economy already battered by years of political unrest since the 2011 uprising.

The law had been part of a broader government effort to broaden the tax base as it pushed through a host of tough measures, including slashing fuel subsidies, amending the property tax law, imposing a 10 percent tax on stock dividends and allowing the Egyptian pound to devalue somewhat against the dollar.

The suspension of the tax “more or less reflects the difficulty of maneuvering through structural reforms,” said Mohammed Abu Basha, an economist at regional investment giant EFG Hermes. “They had a huge list of things they need to do to fix the economy.”

Egypt’s economy has been reeling since the 2011 uprising that ousted longtime autocrat Hosni Mubarak.

Foreign investment dried up — from a high of $13 billion in 2007-2008, it plunged to $2.2 billion after the uprising. Tourists -- one of Egypt’s main sources of revenue -- fled, while growth rates fell from more than 7 percent before the uprising to around 2 percent after Mubarak’s ouster.

Now the government is trying to send the message that it’s open for business.