Parliament ratifies the tax
law for the second time

VAT increased again to 11 percent

Parliament has approved the tax law that aims to finance a pay rise for public servants for the second time. The law was previously revoked by the Constitutional Council and was returned to Parliament.

The lawmakers again raised Value Added Tax (VAT) to 11 percent from ten percent, as they did in the previous ratification.

The approved taxes include new fees on imported alcoholic drinks, phone bills, tobacco, real estate contracts, and the lottery. The MPs also approved the imposing annual fines on seashore properties illegally built on government land.

Prime Minister Saad Hariri said that the Government collected nearly $800 million from the banks on the profit they realized on the financial engineering operations last year, however, the Government has to provide between $800 million to $930 million annually to finance the salary hike.

Hariri said: “It might be a popular decision to finance the salary hike without reforms and without raising taxes but what will happen if the lira collapses after six to eight months from now?”

The fiscal deficit reached almost $5 billion in 2016. Public debt stood at $76.5 billion at the end of June 2017, accounting for 144.4 percent of the country’s GDP.

Ali Hassan Khalil, Minister of Finance, said that 87 percent of the new taxes would not affect low-income individuals.

The first ratification of the law was challenged by ten MPs who said that it was detrimental to low income citizens, would weaken the purchasing power of consumers, and could have inflationary effects. The banks and business associations were also opposed to the law, claiming that it imposes double taxation.

The new taxes include a fee of LL2,500 on bills for fixed line phones and LL250 on prepaid cards for mobile phones.

A tax of LL6,000 was imposed on every ton of cement as a production fee.

An entry fee of LL5,000 will be paid by non-Lebanese travelers entering the country by land.

The internal consumption fee on imported beer has been raised from LL60 per liter to LL700. The fee on imported wine has been increased from LL200 per liter to LL1,000, while imported whisky and vodka that pay LL400 will pay LL2,000.

The lawmakers increased the tax on a packet of cigarettes by LL250, the tax on one kilo of molasses tobacco by LL2,500 and the tax on cigars by ten percent of the cigar's price.

Fees relating to documents and procedures at notary public offices have also been increased.

A fee representing two percent of the sale price will be levied on real estate contracts upfront. An additional tax of four percent will be paid at the time of the registration of the real estate property. If the property is not registered within one year the registration tax will be six percent.

A tax of 20 percent will be imposed on lottery winnings of more than LL10,000.