US embassy cable - 05CAIRO3445

UNCLAS CAIRO 003445 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR NEA/ELA, NEA/RA, AND EB/IFD 
USTR FOR SAUMS 
TREASURY FOR MILLS/NUGENT/PETERS 
USAID FOR ANE/MEA MCCLOUD 
COMMERCE FOR 4520/ITA/MAC/ANESA/TALAAT 
 
E.O. 12958: N/A 
TAGS: ECON, ETRD, EFIN, EINV, EG 
SUBJECT: IT'S THE REAL THING:  U.S. SOFT DRINK COMPANIES 
PLEASED WITH NEW TAX RATE 
 
REF: CAIRO 3146 
 
THIS CABLE IS SENSTIVE BUT UNCLASSIFED -- NOT FOR INTERNET 
DISTRIBUTION 
 
1.  (SBU) Post contacted Tarek Kabil, Chairman and CEO of 
Pepsi Egypt, and Lobna El Dessouky, Chief Financial Officer 
for Coca-Cola Bottling Company of Egypt, to confirm 
implementation of the recently lowered tax rate on locally 
produced soft drinks (reftel).  Kabil said that Pepsi had 
been pleased with the amendment to the tax law, but -- along 
with Coca-Cola -- had some concerns that the language of the 
amendment might be open to differing interpretations.  To 
ensure that the GOE and the soft drink producers were in 
agreement on how the tax would be computed, Pepsi and 
Coca-Cola met with government officials to discuss the exact 
formula to be used.  The two companies signed a Memorandum of 
Understanding laying out the details, and the head of the 
Sales Tax Authority and the Minister of Finance are expected 
to sign it for the GOE within a few days, according to Kabil 
and El Dessouky. 
 
2.  (SBU) Kabil said that after all allowable deductions, the 
effective rate of taxation on Pepsi's soft drinks would be 
around 15 to 18 percent.  Post expects the effective rate 
will be the same for Coca-Cola, though El Dessouky declined 
to comment on Coke's effective rate until she has had a 
chance herself to run all the numbers under the new formula. 
El Dessouky promised to provide us with the rate once it is 
computed. 
 
3.  (SBU) Kabil praised the embassy for its efforts over the 
years to reduce the tax on soft drinks.  He expressed relief 
that the issue was finally resolved, and surprise -- given 
the GOE's foot-dragging on this issue -- that the tax 
amendment had passed so quickly after being introduced.  He 
credited its quick passage in part to Minister of Foreign 
Trade and Investment Rachid, whom he lauded for taking 
ownership of this issue.  Based on the positive comments of 
El Dessouky and Kabil, we expect no more requests from these 
companies on the taxation issue. 
 
 
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GRAY