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Lebanon introduces 10 percent VAT

    Lebanon's parliament has approved the introduction of a 10 percent value-added tax (VAT), to take effect February 1, in a move to increase revenues and redress the country's economy.

The tax, adopted late Wednesday, was meant to help the state collect some additional 800 billion pounds (533 million dollars) each year, according to finance ministry officials.

The parliamentary session was followed by two separate meetings at the presidential palace to discuss privatisation of the electricity and telecommunication utilities, they said.

The meetings, headed by President Emile Lahoud, grouped Prime Minister Rafiq Hariri, Energy Minister Mohamad Abdel Hamid Beydoun, Telecommunication Minister Jean-Louis Qordahi and Deputy Prime Minister Issam Fares.

Finance Minister Fouad Saniora said during the vote on VAT that the tax will help ease the yawning budget deficit in a country suffering from a public debt of 25 billion dollars.

He said the VAT was also an important step toward monetary stability, countering inflation and introducing badly needed fiscal and financial reforms.

The law exempts the health and education sector, as well as tourists and Lebanese holding foreign residency papers who can be reimbursed the VAT on leaving the country.

Saniora said 36 percent of imported products were exempted from customs duty, 47 percent were subject to five percent tax and 17 percent were subject to no more than a five percent tax.

He said 70 percent of customs revenues come from gasoline, cars, cigarettes and alcohol.

The law was met with criticism by a number of MPs who complained that the introduction of the VAT did not come in parallel with a raising of customs duty rates.

"The government argues that it already reduced customs duties last year, but what actually happened was that the government reduced taxes that had previously been increased," said MP Butros Harb.

International institutions, including the World Bank, have expressed backing for Lebanon's efforts to develop the private sector and carry out privatisation, which is expected to raise 2.7 billion dollars.

The government is striving to reduce Lebanon's chronic budget deficit, which hit 22 percent of gross domestic product (GDP) last year, and pay back some of its massive debt of 150 percent of GDP.

Posted 7^th Dec 01

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