20231204-IMF-Lebanon_Technical_Assistance_Report-Tax_and_Customs_Administration_An_Urgent_Need_for_Intervention_42页_819kb

Summary of the Technical Assistance Report: Tax and Customs Administration in Lebanon

Core Content

This Technical Assistance Report (TAR) highlights the urgent need for reform and capacity development (CD) in Lebanon's tax and customs administrations. The report, prepared by the IMF Fiscal Affairs Department, was conducted in response to a request by the Minister of Finance, Youssef El Khalil, and focuses on the immediate and medium-term priorities for improving revenue administration in the context of a severe economic and fiscal crisis.

Main Challenges

• Revenue Collapse: Total revenues have fallen from 21% of GDP in 2018 to 6.3% in 2022, with tax revenues decreasing from 15.4% to 4.7% of GDP. This decline is attributed to economic contraction, inflation, and poor compliance.
• Staffing Shortages: Both the VAT and Revenue Directorate and the Lebanese Customs Administration (LCA) face severe understaffing, with minimal IT support and a lack of skilled personnel.
• IT Infrastructure Failures: IT systems are outdated and lack maintenance. The LCA has only one regular IT staff member, while the tax directorates have no IT staff for system maintenance. Software licenses and support agreements have expired, and there is no effective testing environment.
• Poor Working Conditions: Offices are in disrepair, and essential office equipment is scarce. Field operations and audits have been significantly affected.
• Organizational Inefficiencies: The current structure of tax administration is outdated and inefficient, hindering compliance and revenue collection.

Key Recommendations

Immediate Actions

• Ensure Continuity of Core Functions: Prioritize the stabilization of IT operations and provide a living wage to staff.
• Introduce Semi-Autonomous Tax Administration: To improve flexibility and staff salaries, the authorities should expedite the introduction of a semi-autonomous model.
• Secure International Support: Request assistance in reviewing customs service charges for modernization and to support the proposed CD activity plan.

Next 6–12 Months

• Integrate Reform Priorities: Incorporate the identified reform priorities into the existing joint strategic plan (2022–2026).
• Establish a Risk Management Unit: Implement a risk management framework that mandates the use of ASYCUDA's "Inspection Act" form.
• Deploy ASYCUDA Modules: Implement key modules such as Valuation Control and Airway Manifest Control to enhance revenue and security.
• Transfer ASYCUDA Administration: Move the control of ASYCUDA from the Higher Customs Council (HCC) to the Director General (DG) of Customs to align with its legislative mandate.

Main Points

• Urgent Intervention Required: Due to the severe state of the tax and customs administrations, immediate intervention is essential to prevent total operational failure.
• Crisis Management Focus: The current priorities are largely crisis management-oriented, focusing on maintaining basic operations and retaining critical staff.
• Need for Strategic Planning: A joint strategic plan for tax and customs administrations is necessary, but its implementation is delayed due to resource and structural constraints.
• Importance of IT Systems: IT systems are critical for revenue administration and must be stabilized and upgraded with the help of international partners.
• Role of International Partners: The report emphasizes the importance of international support, including the World Bank, EU, and other development partners, in facilitating reforms and capacity development.

Conclusion

The report underscores that without immediate and sustained intervention, Lebanon's tax and customs administrations will not be able to recover from the current crisis. The proposed reforms and CD activities aim to stabilize operations, improve revenue collection, and modernize the systems in place. The authorities are urged to take decisive action to implement these recommendations and to engage with international partners for support.