Lebanon to hike capital spending by 65%; announces tax rise

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Lebanese Parliament Speaker Nabih Berri, center back, speaks as Prime Minister Najib Mikati, center front, attends a Parliament session in Beirut, Lebanon. Photo - AP

Lebanon’s government adjusted its fiscal budget for the current year by increasing capital spending by 65%, while raising the value added tax to 12% from 10%. Bank deposits also hiked the tariff from 5% to 7%.

According to the revised 2012 budget draft announced by Finance Minister Mohammad Safadi, expenditures will reach 21.3 trillion pounds ($10.5bn) while revenue is projected at 15.78 trillion pounds.

An emailed statement from the finance ministry said the projected budget deficit is about $3.7bn or 8.7% of gross domestic product (GDP) which is higher than the original estimate of 7%.

The government said it will levy a 15% tax on real estate transactions which will be applicable on land sales and real estate bought after 2009. Property bought before 2009 would be taxed 4% of the total sale amount.

Beirut also announced plans to reduce its debt to GDP percentage from 135.1% last year to 134.8% this year. It also projected that the economy will grow at 3% this year from a preliminary 5.2% in 2011, higher than International Monetary Fund projections which put growth at 1.5% last year.

Lebanon amassed a massive public debt during the reconstruction period after the end of a 15-year civil war in 1990 and a month-long bombing by Israel in 2006. According to the Association of Banks in Lebanon, the debt now stands at $54bn at the end of February.

Inflation in the country grew at 3.5% in April compared to the same month a year ago, according to the Central Administration of Statistics.

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