ABL clarifies the new tax burden

Parliamentary propositions will
double corporate tax on banks

The Association of Banks (ABL) issued a clarification statement regarding the taxes proposed by the joint parliamentary commissions.

The increase in the tax on interest on deposits from five to seven percent will affect depositors as well as bank placements in treasury bills and certificates of deposit. “The Central Bank (BDL) currently withholds the tax on interest on placements of banks and pays them directly to the Treasury,” the statement said. The tax amount on interest rates reached $428 million in 2012 and $437 million in 2013, according to the Ministry of Finance. The contribution of clients of this total amount is around 58 percent, and the balance by banks.

“With this increase, the risk is that banks will be forced to raise the interest rates on loans,” said Fouad Rahme, General Manager at BLC Invest.

On the increase of taxes on profits from 15 to 17 percent, the ABL said that banks have been transparent in the disclosure of profits, due to a strict control of the monetary authorities.

The ABL said that the banking sector’s share of corporate taxes on all companies is 37 percent.

The statement said that the current proposal to increase five percent on the net profits of the banks, rather than o on corporate tax, will double the actual amount paid by the banks: “The average tax on profits will go up effectively from 15 percent to 37 percent as an average, and a lot more for some banks. This will create an inequity among banks, and between banks and other companies,” it said.

The ABL said that bank profits should be viewed in relation to its capital and assets. The banking sector’s return on equity is less in most other countries, standing at 12 percent.