Tthe Ministry of Finance. (Credit: Philippe Hage Boutros/L'Orient-Le Jour)
Three weeks after suspending decisions no. 686/1 and no. 687/1 — which set the new methods for calculating income tax — the Ministry of Finance decided to implement them with a number of changes designed to lighten the financial burden.
The decisions should have come into effect in November but were delayed following grumbling from trade unions, employers' organizations and economic bodies in the country. The measures provided a threefold increase in the seven brackets of taxable income after deductions, which are multiplied by seven.
The decisions are applied retroactively dating back to Jan. 1, 2022, and use Sayrafa platform exchange rate (LL38,000 to the dollar, as of Tuesday) to calculate the taxable income, in lira, on salaries paid in dollars. Once applied, these measures would drastically increase the amount of tax due by workers whose salaries have been increased or are (totally or partially) paid in dollars and would also risk exploding employers' social security charges.
While the Ministry seems to have maintained these brackets — which cannot be changed since they are dictated by the 2022 budget and not by a circular decision — it did move toward adjusting the employed exchange rate.
In a statement released Tuesday, the ministry said it is prepared to adopt "a rate of LL8,000 to the dollar" for the calculation of income taxes in the first 10 months of 2022 and a rate of "LL15,000 per dollar" for the calculation of those in "November and December." The implementation of these decisions is yet to take place.
Caretaker Prime Minister Najib Mikati and the caretaker Minister of Finance Youssef Khalil met with various economic organizations during the day Tuesday, and these organizations claimed the rate of LL15,000 should also be adopted for the calculation of income taxes throughout 2023.
With regard to employees paid in dollar bank checks — which were previously calculated at the LL8,000 rate — the new rate adopted is LL8,000 to the dollar for accounts that contain up to $3,000 dollars in checks and LL1,507.5 for any amount above this margin.
The dollar checks, or "lollars," are dollars stuck in banks due to informal capital controls imposed since late 2019.
In its statement, the Ministry of Finance mentioned the possibility of changing the tax rates in the 2023 budget while providing an increase in allowances.