Lebanon Businessnews News

Income tax evasion
up to $1.9 billion yearly
Recouping it would pay off half the deficit
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Out of a potential income tax of $2.9 billion per year, the public Treasury is only grossing one third, according to a study by Bank Audi, which claims that this brings income tax evasion to $1.9 billion per year.

Marwan Barakat, Head of Research at Bank Audi, said: “The uncollected income tax represents the largest contributor to tax evasion. There is also delinquency in payment of some electricity bills and under-declaration of the value of real estate transactions, leading to lower registration fees and property taxes.”

The remaining share of non-paid taxes through electricity bills and properties and other tax sources is $1.1 billion, bringing the total fiscal evasion to $3 billion.

The $2.9 billion potential income tax is calculated on the basis of a Gross Domestic Product (GDP), equivalent to $50 billion, out of which two thirds are from salaries and profits, representing $32 billion, of which $6-$7 billion are exempt.

As the average tax is 12 percent, 15 percent for companies and between zero and ten percent for individuals, this brings the potential income tax to $2.9 billion per year, according to Barakat.

“Through this potential income tax, the country is able to cover half of its yearly deficit,” said Barakat. The deficit in the 2015 draft budget, for instance, is estimated to reach $5.2 billion, according to the Ministry of Finance.

Government revenues represent 22 percent of the GDP, compared to an average of 30 percent for an emerging country and an average of 40 percent for a developed country, according to the Bank Audi Research department.

“The first step for a better fiscal environment is to improve tax collection before imposing new taxes,” said Barakat.
Reported by Leila Rahbani
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Date Posted: Jun 12, 2015