BEIRUT: Locally produced pharmaceutical and medical products will be exempt from VAT to give Lebanese industrialists a chance against foreign competition, caretaker Industry Minister Vreij Sabounjian and Finance Minister Mohammad Safadi said Friday.
The ministers also proposed extending the grace period for the tax payments of financially troubled merchants and companies.
Currently, “foreign firms can export their pharmaceutical goods to Lebanon without paying any taxes or VAT on these goods while Lebanese manufacturers have to pay the 10 percent VAT on all their pharmaceutical and medical products. With the VAT exemption, local producers can compete fairly with foreign firms,” Sabounjian said at a joint news conference.
The minister added that in the past, Lebanese merchants had imported medications from abroad without paying VAT, giving foreign manufacturers an edge over local producers.
Imported medical equipment and medications are among the items that will be exempt from VAT tax.
A number of pharmaceutical industries have emerged over the past three years and more are expected to join the market this month.
But despite the relative growth of Lebanese pharmaceutical companies and plants, Lebanon still imports most of its needs from abroad.
Safadi said the Finance Ministry was cooperating with all economic sectors and especially those that are incurring losses and a drop in business volume.
But the minister stressed that the proposal still needed the approval of the Cabinet and Parliament.
Sabounjian also proposed to Safadi extending the grace period for financially troubled firms and merchants to six years instead of three to give traders a chance to make a profit.
“There is no guarantee that the political and security crisis will end soon and for this reason I suggested extending the grace period for tax payments to six years,” he told The Daily Star.
Many merchants in Beirut and other regions have been pressing the government to give them more time to pay their income tax, noting that most businesses have reported heavy losses over the past three years.
“This means merchants or firms recording losses have six years to discount these losses so they can pay income tax to the Treasury,” Sabounjian explained.
He said that according to Lebanese law losses could be discounted for only three years, but based on the new proposal financially troubled merchants or industrialists could discount their losses over six years.
The minister acknowledged that the caretaker Cabinet currently could not meet to pass the tax proposal.
“We are trying to find an acceptable formula to speed up the endorsement of the tax discount proposal. I hope the ministers and politicians can focus more on the economy and not politicize these issues,” Sabounjian said.
Safadi said what really mattered was that troubled merchants and industrialists not be forced to declare bankruptcy just because they owe the Treasury money.