The Lebanese cabinet has approved the value-added tax (VAT) draft law, the first serious step toward boost dwindling treasury revenues, reported the Daily Star newspaper.
The law, which still has to be approved by Parliament, is intended to compensate for the drop in revenues from customs duties since the government cut tariffs on most imports last year to stimulate the economy.
The 2001 draft budget, which is still being debated by parliament, projects revenues of only $640 million from customs duties compared to $800 million in 2000, said the paper.
Customs had, for the past few years, been the largest single earner for the government, followed by telecommunications.
The government hopes that introducing the VAT at 10 percent will generate about $500 million in revenues each year.
According to the draft, the new tax will apply to any business generating more than $333,000 in gross revenues a year, said the paper, adding that officials from the finance ministry say that more than 90 percent of businesses in this category are based in Beirut.
VAT, which is levied on the value added to a product at each stage of the production process including the point of purchase, is due to come into effect by the start of next year, although some economists have suggested that this target is unrealistic.
One of those who voiced some concern about the VAT was the president of the Lebanese Industrialists Association, Jacques Sarraf.
Sarraf said that prices would rise by 10 percent if the VAT was implemented next year. He advised the government to cut the new tax to 5 percent instead of 10 percent, according to the paper – Albawaba.com
