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SUBMIT NEWS
CHAMPION OF THE DAY
LEADERS NEWS
Banks to generate
$1.2 billion in taxes
The levy on swap profits is
enough to cover salary scale
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The Association of Banks (ABL) said that banks will pay $850 million in corporate income tax generated by the swap operations carried out with the Central Bank (BDL) in 2016.
Banks were to pay $322 million in corporate income tax for the year 2016 on all operations, excluding the gains on swap operations. Bank shareholders will also pay a dividend tax of almost $56 million, bringing the total to be paid by banks and their shareholders to $1.23 billion.
ABL said the tax on the swap operations alone will be enough to cover salary scale commitments amounting to $796 million and which are included in the State’s 2017 draft budget.
As it has been estimated in the budget draft law and when the tax on the swap operations is unaccounted for, the deficit in 2017 represents 9.5 percent of GDP. When the tax on the swap operations is included, it would decrease the deficit to 7.9 percent or $4.3 billion, similarly to the deficit levels recorded in recent years, according to ABL.
BDL had instructed banks to provision the profit made on swap operations in order to meet requirements of the International Financial Reporting Standard (IFRS 9), which will be implemented in 2018.
The banks were instructed by the Ministry of Finance that they have to pay taxes on these operations, which should be declared as part of the taxable gains realized in 2016.
Amine Awad, advisor to BLOM Bank Group, and former member of the Banking Control Commission, said that this type of provision is not exempt from corporate income tax.
“These provisions are more akin to reserves than provisions. Only provisions against accounts in default are approved by the Banking Control Commission to become exempted from corporate income tax,” he said.
BDL barred banks from distributing to their shareholders profits realized on swap operations, even if these funds are not needed for provisions. The profits should remain recorded as ‘deferred liabilities.’
Reported by Shikrallah Nakhoul
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Date Posted:
Mar 06, 2017
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