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French Version

Lebanon sees incremental increase in VAT revenues

Value-added tax generated at customs makes up lion's share of total figure

Value-added tax (VAT) revenues collected at customs accounted for 73.4 percent of overall VAT receipts in 2007, while the balance of 26.6 percent came from VAT collected from internal economic activity, said a report in the latest issue of Byblos Bank's Lebanon This Week. VAT revenues collected at customs increased by 4.3 percent in 2007 from 69.1 percent of overall VAT receipts in 2006. VAT revenues collected at customs increased by 23 percent to $954 million in 2007, in line with the 25.7-percent increase in imports, reflecting higher prices of fuel and imports from Europe. VAT receipts from internal economic activity were unchanged from $346.4 million in 2006.

Mineral fuels and oil accounted for 28 percent of VAT receipts collected at customs, making it the biggest source of such VAT revenues in 2007. They totaled $265.3 million in 2007, up by 9 percent from the previous year. Their nominal increase accounted for 13 percent of the total increase in VAT at imports.

VAT from vehicles was the second-leading source of VAT from imports, representing 12 percent of the total, unchanged from 2006. It increased nominally by 31 percent year-on-year to $118 million, in line with the 30-percent increase in the value of vehicle imports.

Machinery and mechanical appliances accounted for 8 percent of VAT collected at customs, representing the third-largest source of such taxes in 2007, up from 7 percent in 2006. VAT receipts from this category increased by 24 percent to $71.6 million in 2007. This category was followed by electrical machinery, accounting for 5.9 percent of the total. VAT from this category rose by 30 percent year-on-year to $56.4 million, corresponding to the 32-percent increase in imports of electric machinery.

Iron and steel accounted for 5.6 percent of VAT at imports, making it the sixth-largest contributor to such taxes. VAT from the import of iron and steel rose by 58 percent to $53.7 million last year, as the value of iron and steel imported jumped by 59 percent in 2007.

In parallel, wholesale trade accounted for 21 percent of VAT collected from internal economic activity, representing the biggest source of VAT revenues from internal activity in 2007. It rose by 18.2 percent year-on-year to $72.3 million. VAT from wholesale trade represented 18 percent of VAT revenues from internal activity in 2006, also the biggest source of VAT during that year, after ranking in fourth place in 2005 and 2004. The increase in wholesale trade activity was instrumental for the higher VAT from internal activities, as it offset decreases in other areas.

Retail trade was the second-biggest internal source of VAT in 2007, accounting for 14 percent of total VAT receipts from internal activity, down from 17 percent in 2006. Retail trade was the biggest source of VAT revenues prior to 2006. VAT from retail dropped 21.2 percent to $46.8 million in 2007, reflecting slower domestic activity. Architectural and engineering services, advertising, and business and legal consulting accounted for 12 percent of VAT receipts in 2007, unchanged from 2006, representing the third-highest source of VAT from internal activities. They declined by 1.6 percent to $41 million last year.

Hotels and restaurants generated 8 percent of VAT revenues last year, unchanged from 2006, ranking as the fourth-largest source of VAT, similar to 2006. VAT from hotels and restaurants rose by 1.2 percent year-on-year to $28 million. The slight increase reflects a combination of higher prices offsetting the lower number of tourists in 2007.

Construction followed in fifth place with $23.1 million in VAT receipts, down 12.6 percent from 2006, and accounted for 7 percent of VAT from internal activity last year. Further, the sale, maintenance and repair of motor vehicles generated 4 percent of VAT receipts from internal activities, down from 5 percent in 2006. VAT from this category declined by 9 percent to nearly $15 million in 2007.

Real-estate activities accounted for 3.4 percent each of VAT receipts from internal activities last year, while manufacturing of food products and beverages represented 3.3 percent of the total. VAT from real estate rose by 30.8 percent to $11.4 million, while tax from the manufacture of food products and beverages was unchanged at $11.6 million. VAT collected from real estate is from commercial rent as the sale of real estate is VAT-exempt.

Also, VAT receipts from the manufacturing of other non-metallic mineral products rose by 53.6 percent annually to $11.1 million, accounting for 3.2 percent of the total, while post and telecommunications accounted for 3 percent or $10.3 million of VAT collected from internal activity in 2007.

The VAT contribution from post and telecommunication is understated, as it does not capture all the VAT raised from the telecommunications sector. As per the VAT law, a large fraction of VAT on telecom is directly transferred to municipalities and so is not reflected in these figures. Other sources of VAT receipts accounted for 22 percent of the total.

Beirut 02-06-2008
The Daily Star

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