Lebanon’s Parliament recently ratified the Value Added Tax (VAT) draft law, paving the way for its implementation, starting February 2002. The new 10 percent VAT is in sync with the government’s fiscal reform and tax modernization program. It is expected to raise government receipts and generate approximately $500 million a year in additional public revenues, reported Lebinvest.
The VAT is also expected to raise prices in Lebanon since most tariffs have not been eliminated yet. The Finance Ministry forecast a 4.5 percent rise in prices. Moreover, VAT will replace some indirect taxes such as the five percent tax imposed on hotels and restaurants and taxes levied on non-alcoholic beverages and cement.
The VAT will be imposed on most imported and locally produced goods and services. Companies with annual earnings of more than 500 million Lebanese Pounds ($332,000) are obliged to register for the tax, while businesses with an income between LP150 million and LP500 million have the option of not registering. The Finance Ministry expects between 5,000 and 7,000 companies to register for the tax.
The new measure is expected to offset the country’s annual budget deficits and its $24 billion public debt. The tax is furthermore considered necessary to compensate for lower state revenues following recent privatization moves and the import tariff reduction late last year, which cut into the single largest source of income for the Lebanese government until now.
The VAT is effective in about 120 countries. It is seen as a prerequisite to help integrate the Lebanese economy in the global economic and trade system, and is a needed step to join the World Trade Organization and the Euro-Mediterranean Partnership. — (menareport.com)
© 2001 Mena Report (www.menareport.com)
