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The paper examines Lebanon's current revenue strategy and argues that it is not a recovery plan but an extraction model: regressive indirect taxes, fee hikes and administrative decrees levied on a population that, in the paper's account, faces real unemployment above 50% and has lost its savings, while public services remain absent.
Its starting point is the asymmetric de-leveraging that followed the 2019 crash. Corporate borrowers were able to discharge dollar loans in lira at the legacy rate of LBP 1,500 or through discounted local cheques. The paper argues that this drained the banking system of the real value that could have repaid depositors, left many import-dependent business models unreformed, and pushed the fiscal burden onto households. It then sets out an alternative framework that shifts the tax base towards the beneficiaries of that windfall and towards monopoly rents, while giving residents and returning investors fiscal room.
For policymakers, lenders and investors, the paper links tax reform to three wider workstreams: corporatisation of state assets, a credible deposit-recovery architecture, and the classification of firms and banks by solvency and by how they cleared pre-2019 debt.
Key findings
- The paper proposes a retroactive windfall levy on enterprises that settled foreign-currency debt at legacy rates, with proceeds ring-fenced in a Deposit Repayment Fund subject to monthly disclosure and public audit.
- It recommends taxing exclusive commercial agencies and import monopolies directly and removing their legislative protection to lower consumer prices through competition.
- Resident relief measures include a multi-year freeze on personal income tax and basic property fees for low- and middle-income households, removal of VAT on essentials, fuel and medicines, and a freeze followed by a sharp cut in inheritance tax.
- To attract diaspora capital, it proposes 10-year corporate tax holidays for new operating businesses and duty-free import of capital equipment.
- Deposit-recovery bonds would be backed by state assets held in bankruptcy-remote SPVs under international jurisdiction, with a legally binding secondary-market price floor of at least 20% of par.
- A three-way cash pool from privatisation proceeds, central bank allocations and mandatory bank recapitalisation would fund direct cash repayments and early bond redemption at par.
Summary of the paper; the full analysis is in the PDF.