The Customs Directorate is soon expected to change the tax brackets applicable to new and used imported vehicles, as well as the exchange rate that will be taken into account when calculating customs duties, commonly referred to as the “customs dollar.”
Selim Saad, advisor to the union of new car importers and Elie Azzi, head of the union of used car importers confirmed this information to L’Orient-Le Jour.
They did not however provide specific details on the changes that will be adopted and said they prefer to wait until they are formalized by the customs administration before commenting.
Elie Azzi said that the union of used cars importers will meet Tuesday with the Customs Directorate to discuss details related to the implementation of this measure, which the caretaker cabinet approved last week.
The cabinet gave the green light for modifying these brackets, which date back to when the old official rate of LL1,507.5 to the dollar was still in force. The State Shura Council also approved this change. The new brackets are expected to reflect the reality of the customs dollar rate.
The constitution usually reserves intervention in matters of taxation to the parliament, but in 2018 an exception was made when parliament gave cabinet the green light to intervene in customs over a 5 year period (Law No. 93 of October 10, 2018). The Cabinet then transferred customs duties to the High Customs Council.
Likely multiplied by 60 in May
As the value of the Lebanese lira began to plummet in 2019, the old official exchange rate was overtaken by the parallel market rate, which has rested at about LL97,000 to the dollar for the past few weeks. It was not until late last year however, that authorities began to set taxes in accordance with the lira's depreciation.
For customs duties, the dollar rate was set at LL15,000 pounds to the dollar on Dec. 1, 2022, then LL45,000 on Feb. 1 and LL60,000 last week. It is to be raised to LL90,000 to the dollar in May, as decided by the cabinet. However, car importers have so far benefited from a lower dollar rate than that applicable to other goods (LL8,000 and then LL15,000 to the dollar since last week, all depending on the date of shipment).
When the old official rate of LL1,507.5 to the dollar was applicable, the customs tax imposed on cars worth less than LL20 million amounted to 20 percent.Those worth more than LL20 million were taxed at 50 percent. At that time, the LL20 million was equal to $13,333, while it is now worth $206 at the current market exchange rate and $1,333 at the new official rate of LL15,000, which came into effect on Feb. 1.
Those importing new vehicles argued that maintaining the old brackets would mean that a 50 percent customs tax is imposed on all imported vehicles. They have called for adjustments to the customs dollar. With the expected change, the LL20 million bracket would become LL800 million if it is aligned with the current customs dollar (multiplied by 40) and LL1.2 billion if the customs dollar is raised again in May. These two amounts are equivalent to LL$13,333.
Much of the public criticizes the importers for complaining, since they have already benefited substantially from the delay in amending the exchange rate for taxing vehicles.
This article was originally published in French in L'Orient-Le Jour. Translation by Joelle El Khoury.