Lebanese banking chief warns on taxing deposits

22 January 2003
Head of Lebanon's Association of Banks and the Union of Arab Banks, Joseph Torbey, on 20 January issued a strong warning against imposing a tax on the bank deposits of non-residents, saying that it could inflict severe damage on the country's banking sector. The government has proposed levying a 5 per cent tax on all bank deposits to make up for the revenue lost through budget amendments, forced by parliamentary and public opposition. Demonstrations and threatened strikes pushed the finance committee into scrapping certain tax increases and benefit changes. Torbey said that taxing only residents' deposits would secure the necessary£Leb 100,000 million ($66.6 million). Including non-residents and financial instruments would undermine the banking sector, which achieved strong growth in 2002, and negate legislation that had fuelled this growth. A law on banking in free zones absolves non-resident depositors from any tax and another exempts financial instruments, such as certificates of deposit, from taxes on interest. However, with these reservations, Torbey said that banks generally accepted the need for the new tax. 'This 5 per cent tax took us by surprise, but we do realise it is an urgent measure needed to provide alternative sources of revenue.'

Torbey also gave some details on the success of the Lebanese banking industry in 2002. 'The consolidated balance sheet of commercial banks in Lebanon reached $52,400 million at the end of 2002, which means our banking industry is as big as the UAE's or Kuwait's,' he said. Bank deposits rose 6.3 per cent to $43,000 million. In December, Lebanon's commercial banks agreed to assist the government in reducing its enormous debt by subscribing to $4,000 million in interest-free government bonds, cutting debt servicing costs by about $400 million (MEED 12:12:02).

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