Lebanese banks go on strike against decision to hike tax on deposits

By bne IntelliNews April 11, 2014

Lebanon’s bank sector will hold a one-day strike on Friday, April 11, against the parliament’s plan to hike the tax on bank deposits’ interest revenue from the current 5% to 7% as the government desperately seeks new sources to boost budget income amid surging spending, daily Annahar reported. The proposed tax hike is among a basket of new measures aiming to finance the salary hike for the over-staffed public sector.

The Association of Banks in Lebanon warned that hiking the tax on bank deposits will boost inflation and threaten the stability of the national currency and the purchasing power of the Lebanese. Lebanon’s business community also opposed the proposed increases on deposit interest revenues and the outlined taxes, including those on financial institutions.

The Parliament’s Joint Committees also approved on April 10 fines for property violations. The annual fine amounts to 2.5% of the value of any illegally obtained land and 7.5% of the value of any illegally constructed building on seafront properties. The law will have a retroactive five-year scope. The Joint Committees are expected to finalise the new draft law concerning the tax hikes on Friday. They will then refer it to parliament for final endorsement, likely over the weekend or early next week.

The parliament also passed a draft legislation allowing private companies to produce electricity for the indebted state-run Electricite du Liban (EDL) for two years.

Lebanon’s banking sector total assets grew 7.4% y/y to LBP 247.8tn (USD 164.4bn) at end-January 2014, data from the association of banks in Lebanon recently showed. The banking sector, thus, remains the key supporter of the country’s creditworthiness and sovereign ratings amid the political and security turmoil. The banking sector is also the main subscriber to domestic debt issuances. Total bank deposits, including resident and non-resident private sector deposits and public sector deposits, increased 7.7% to LBP 207.9tn at end-January, accounting for 83.9% of total assets. 

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