In Lebanon the import tax for cars is a hotly contested subject. Almost all Lebanese car dealers are up in arms about the import taxes they have to pay on their merchandise. Negib Debs, the brand manger for Gargour & Fils, dealers for Mercedes-Benz, summed up the sentiment of car dealers in Lebanon when he stated that, “Lebanon is one of the few countries in the world that has customs and VAT; this tax is very unfair.” Currently, import taxes are structured as follows:
If cost of the car + insurance + freight (CIF) is $0-13,333, customs tax is 20%; If CIF is $13,333 or more, customs tax is 50%. There is also a 10% VAT on customs and car value and a 7% registration fee.
Thus, for a car that has a CIF value of $20,000, the first $13,333 of the car’s CIF will incur 20% tax ($2,666) and the remaining $6,667 will incur 50% tax ($3,333.50). Subsequently, the total customs duty that a car of $20,000 will pay is approximately $6,000, on top of which come VAT and the registration fee.
Car importers are furious. Farid Homsy, director at IMPEX, dealers for Chevrolet, Cadillac, Hummer and Isuzu, said, “In modern countries you don’t have to pay customs; you only have VAT. In the GCC you only pay 5% on customs, so the custom charges here are very expensive.”
Nabil Bazerji, the managing director of Bazerji & Sons representing Maserati, Suzuki and Lancia, does not understand why the government has decided to structure customs duties in a way that so heavily favors small cars, especially when in Lebanon the need and demand for cars is for mid-sized cars because of the large average size of families.
Luxury automotive customs duties are particularly punishing and add a large premium on the cars compared to GCC. Subsequently, many Lebanese living and working in the Gulf purchase cars there and ship them home, resulting in many cars circulating Lebanon’s streets with foreign number plates. Assaad Raphaël, chairman and general manager at the Porsche Centre Lebanon, claims that Lebanon is missing out on selling luxury cars to Lebanese living abroad, and also to Gulf tourists that love to buy high end automotives. He argued that, “If we reduce the taxes, we believe there would be a huge impact on sales. If the number of sales increases the government’s income would go back to its level, if not better. If new car sales go up you would increase safety on the roads with better road-worthy cars, pollution would go down as the new cars have a better impact than the old cars … Lowering the tariffs would also definitely block people from bringing their cars from the Gulf region.”
This plea for lowering taxes does not convince Jamil Sélim Ramadan, certified clearing agent for the customs authority. “This is a good argument but it does not add up. Even if he doubles his sales and subsequently doubles his staff as well he would not make up the lost revenues; it is a bad argument.”
Ultimately, luxury items such as cars, along with tobacco, alcohol and so on, are a very important income generator for the government and Ramadan reported that this year there has been a 70-80% increase in government revenues on luxury products.
Not all car dealers are unsympathetic to the need for the government to gain revenues from cars, however. Gergi el-Murr, the Kettaneh VW brand manager, agrees with the taxes. “We accept that the government needs an income, even though in the region we are comparatively weak because of the very low taxes in the GCC.” Instead, el-Murr objects to the way that the yearly tax and registration fees are structured to favor older cars. “It should be the opposite, to push people to get rid of their old cars and buy new ones for their security, the pollution of older cars and safety. The difference is enormous. For example, a 10-year old car costs $60 in tax and $600 to register, and for a new car there is $350 in tax and $2,000 to register,” he said.
Change does not appear to be coming anytime soon, and those hoping Lebanon’s possible accession into the World Trade Organization will change anything will be disappointed. The customs duty structure means any change will be insignificant, as most of the charges are actually under a ‘local consumption fee’. Ramadan explained, “customs only makes up 5% of the total amount and the rest is made up of local consumption fees. So if the WTO abolishes customs it will only affect the fees by 5%.”
Though car dealers cry foul over customs duties, they have yet to offer the government viable alternatives. Or, as Negib Debs pointed out, “we like to whine but when it comes to it we don’t do anything about it.”
