Lebanon tax revenue down 12.5% in Q1 as economic crisis bites

BEIRUT, June 11 (Reuters) - Lebanon’s tax revenues dropped 12.5% during the first quarter of 2020 compared to a year earlier, ministry of finance data showed on Thursday, as a bruising financial crisis took its toll.

Lebanon has seen its currency plunge in value and unemployment soar since anti-government protests erupted last October. It defaulted on its sovereign debt before entering talks with the International Monetary Fund last month.

The finance ministry data is the first to capture a full quarter since the protests started.

Among the largest declines were in customs and value-added tax revenues, which fell by 51.5% and 42.3% respectively during the quarter, indicating a sharp fall in consumption.

Overall tax revenues for March, the most recent month available, dropped 24.3% compared with the same month a year earlier.

Nassib Ghobril, chief economist at Byblos Bank, said revenues were expected to fall further, as first quarter figures capture only the start of a coronavirus lockdown that began in mid-March and which has compounded the crisis.

The data indicated that 72.5% of income tax collected for the quarter came from taxes on interest payments, such as on bank deposits, versus 54.6% a year earlier. It was the sole type of income tax to grow, while others saw double-digit declines.

“It highlights once again that the government is relying disproportionately on tax on interest income to finance its operations and should look to fight tax evasion and reduce the size of the informal economy,” said Ghobril.

An economic rescue plan put forward by Beirut maps out some $83 billion in losses and envisions covering them in part by contributions from bank capital and deposits, proposals the country’s banks have rejected. (Reporting by Eric Knecht; Editing by Alex Richardson)