Lebanese banks dispute $600 million tax claim over Eurobond gains

Report by Bassam Abou Zeid, English adaptation by Yasmine Jaroudi

Lebanese banks accuse the Finance Ministry of seeking to collect around $600 million in taxes from them because they recorded profits on Eurobonds as their value in Lebanese lira rose sharply amid the collapse of the national currency.

The banks argue that the bonds were valued at around LBP 150,000 when the dollar traded at LBP 1,500, compared with roughly LBP 9 million when the exchange rate reached LBP 89,500 per dollar. They maintain that they lost more than 75% of the bonds’ actual value in dollar terms and that it is therefore incorrect to classify the currency-driven increase in their pound value as a real profit.

Banking sources said taxes should be imposed on actual profits in accordance with accounting and legal standards, rather than on book gains that fail to account for investment losses.

The sources also warned that any new tax deductions from banks would reduce the funds available for returning deposits to customers, particularly those with deposits of up to $100,000. They argued that the collapse of the exchange rate should not be turned into an opportunity for additional tax collection or used to impose further burdens on banks and depositors at the expense of their rights.

However, Finance Ministry sources said the government had not imposed any new tax on the banks. They said the ministry had asked some banks, based on existing legal provisions, to correct their financial declarations after they reported having no profits.

If the banks fail to amend those declarations, they could be subject to taxation, the ministry sources said, describing the measure as part of efforts to combat tax evasion, particularly among large taxpayers, including major companies.