Calls for Transparency: New tax provision in 2024 Budget raises concerns

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2023-09-05 | 00:11
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Calls for Transparency: New tax provision in 2024 Budget raises concerns
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Calls for Transparency: New tax provision in 2024 Budget raises concerns

In a miscellaneous provision within the 2024 budget, an article has emerged allowing "taxpayers to settle their taxes from their foreign currency (pre-dating October 2019) bank accounts at a rate of 40 percent of the US dollar's value on the Sayrafa platform."

Experts have viewed this article as a disguised haircut on deposits trapped in banks, estimated at around $90 billion. Depositors who choose this option will face a deduction from their deposits, with the state absorbing the difference between the old dollar rate and the Sayrafa rate. In essence, both the state and depositors will share the loss to alleviate the banks' obligations to depositors.

This article was originally published in and translated from Lebanese newspaper Nidaa al-Watan.
Financial and economic expert Michel Kozah supports this analysis and explains that "before the end of Governor Riad Salameh's term, he burdened the state with $57 billion. What they are trying to do with this provision in the budget is to create room for those who want to pay their taxes using their deposits, which are in dollars."

The state is attempting, through this provision, to reduce the deposits in dollars in accounts amounting to approximately $90 billion. This means that the dissolution of these deposits through this article could take around 50 years to cover this gap in this manner.

Regarding accounting and taxation, accounting and taxation expert and member of the ALDIC Association Nadim Daher clarifies that "this provision in the budget will lead to two problems. The first is financial inflation.

Converting dollars, or rather the reserved dollars in banks, into Lebanese lira, even at a rate of 40 percent of the Sayrafa rate, will increase the money supply," pointing out that "we have to wait for the opinion of the BDL on this issue because Acting Governor Dr. Wissam Mansouri insists on controlling inflation.

Therefore, he did not meet Electricite du Liban's (EDL) request to convert amounts from lira to dollars to avoid inflation."

Daher emphasizes that "as always, laws and provisions are passed late, meaning that these provisions should have been enacted at the beginning of the crisis.

This is what we proposed as the Association for Taxpayer Protection as one of the solutions to the problem of frozen deposits in banks. Still, we were not heard," considering that "the return on this provision is positive. As for the increase in inflation rates, it is a source of concern because we do not know the size of the money supply that will be injected into the market through this provision, but it is beneficial for companies because it encourages them to pay their taxes, which are significant amounts in Lebanese lira." 

He believes that "in terms of individual depositors, they have the freedom to apply it or not, so it is not compulsory, unlike the circulars issued by the BDL, including Circular 151."

In conclusion, "this provision can be challenged based on the principle of tax equality among citizens because it allows companies and individuals to pay their taxes in a certain way, while a segment of the Lebanese people spends fresh dollars to pay their taxes. However, the basis for the challenge is not solid."

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