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Lebanon Urged To Broaden Tax Base

by Lorys Charalambous,, Cyprus

09 June 2010

A recent International Monetary Fund (IMF) mission in Lebanon called for the government to tackle the country’s debt of 148% of gross domestic product (GDP) by broadening the tax base significantly.

In a statement, Andreas Bauer, chief of the Lebanese mission, said that faced with one of the highest debts in the world, the authorities are facing two important challenges. First, managing cautiously the buoyant economy to avoid potential overheating risks, and second, seizing on the positive economic momentum to implement a range of pending reforms.

He said, with little need to provide fiscal stimulus to country’s buoyant economy this year, the country’s budget should aim to achieve a higher-than-budgeted primary surplus in 2010.

In the medium-term, the mission recommended that fiscal policy should provide room for more public investment and social spending, to decisively reduce the public debt-to-GDP ratio. “For that, fiscal space could be created through a combination of measures: to increase the quality of public spending, and mobilize additional revenues.

Outlining recommendations, Bauer said: “These tax measures could include elements such as introducing the global income tax, taxing capital gains, broadening the VAT base by reducing exemptions/refunds, and considering gradual moderate increases in VAT and corporate income tax rates, which are relatively low by international standards.”

TAGS: capital gains tax (CGT) | tax | value added tax (VAT) | fiscal policy | budget | International Monetary Fund (IMF) | corporation tax | Lebanon

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