Lebanese govt agrees to raise tax on interest payments to 10% for three years (updated)

Bloom Industries

10/05/2019 18:08

(Adds quote, background, context)
    BEIRUT, May 10 (Reuters) - The Lebanese government agreed on
Friday to raise the tax on interest payments to 10% from 7% for
three years as part of the draft 2019 budget, the information
minister said.
    Finance Minister Ali Hassan Khalil has described raising the
tax as "fundamental" to bringing down heavily-indebted Lebanon's
budget deficit. 
    "It was a very long session, but it was very productive in
terms of outstanding matters, most of which were decided, namely
raising the tax on interest for banks and individuals from 7% to
10% for a period of three years," Information Minister Jamal
Jarrah said in a statement. 
    "After this period, the tax will return to 7% and our
financial and economic situation has improved, and if there is a
further improvement, we could lower it from 7% to perhaps 5%,"
he added. 
    The chairman of the Lebanese banking association recently
warned any increase in the tax on interest payments would affect
capital flows to Lebanon, weaken banks’ ability to play their
financing role in the economy, and obstruct growth.
    Interest income had been tax-free until the government
introduced the 7 percent levy last year.
    The draft budget under discussion by Prime Minister Saad
al-Hariri’s government aims to bring down the deficit to less
than 9 percent of GDP in 2019 from 11.2 percent in 2018, the
finance minister has said.
    Proposals in the draft budget to reduce the public sector
wage bill led to protests and strikes by state workers this
week. 

 (Writing by Tom Perry and Angus McDowall
Editing by Catherine Evans)
 ((thomas.perry@thomsonreuters.com; Reuters Messaging:
thomas.perry.reuters.com@reuters.net))