Lebanon: An Increase in Taxes on Electrical Machinery Imports

An Increase in Taxes on the Imports of Electrical Machinery and Equipment in Lebanon


Starting in May 2019, the imports to Lebanon were subjected to a 2% increase in taxes, and this being a 10% tax on 20 specific imported goods, such as flour, furniture, electric machinery and many more. The reason for increase in taxes for these imports was to, "reduce the trade imbalance, and encourage local production" (HKTDC Research). Specifically, focusing on Electric machinery and equipment, the tariffs for these products the year before were about 3.38% in Lebanon. When thinking about the impact that this increase in taxes might have on the different people in Lebanon, specifically for the domestic producers, they might experience an increase in production. This may mainly be due to there being less imports of Electrical machinery and equipment from other neighboring countries, due to the increased taxes on the products. This will cause domestic producers of Electrical machinery to have to produce more, causing it to move to Q3. This increase will also cause the money that they're going to earn to increase. Prior to the 10% increase in taxes, their revenue was just at g, but now, it's at g + a + b + c. However, this increase in taxes may also cause foreign producers to be able to produce at Q3Q4, but have to pay the amount of increased taxes that have been implemented by the Lebanese government. Specifically, the 10% increase will cause for foreign producers of Electrical machinery and equipment to gain less money from their imports, as prior to the tax they were earning h + i + j + k, but currently, they're only earning the revenue i + j. In terms of the Lebanese government, by implementing this 10% increase in taxes, they will be able to earn some money from what's payed by foreign producers of Electrical machinery and equipment. The money gained by the government will be just d + e. Lastly, the overall world efficiency for Electrical machinery and equipment may go down, because the increase on the taxes for imports is going to cause the Q1Q3 of Electrical machinery and equipment to be produced by more domestic producers, and less by foreign producers who may be more efficient. Domestic consumers may also have to pay more, as electrical machinery that's imported has to go through the taxes, which have to be paid by foreign producers. This causes domestic consumers to have to pay more to purchase foreign Electrical machinery and equipment.

(Instead of Price of wheat and the Quantity of wheat, think of it as the Price of Electrical Machinery and the Quantity of Electrical Machinery)

The main reason why I think Lebanon decided to have an increase on their taxes is because, as I already mentioned above, they wanted to, "reduce the trade imbalance, and encourage local production" (HKTDC Research). In this specific article, they also mention that the Lebanese government implemented this increase in their taxes because, overall, the products that are made by domestic producers are "facing competition from goods imported from China and Turkey." In the year prior, in 2018, the imports from China were around $2 billion dollars, while exports were around $20 million (HKTDC Research).


Works Cited

“The Atlas of Economic Complexity by @Harvardgrwthlab.” The Atlas of Economic Complexity, https://atlas.cid.harvard.edu/countries/124.

“LEBANON: Government Approves 2% Tax on Imports and 10% on ‘Dumped’ Products.” HKTDC Research, https://research.hktdc.com/en/article/MjkwNDY3MTM1.

“Electrical Machinery and Equipment in Lebanon.” OEC, https://oec.world/en/profile/bilateral-product/electrical-machinery-and-equipment-and-parts-thereof-sound-recorders-and-reproducers-television-image-and-sound-recorders-and-reproducers-parts-and-accessories-of-such-articles/reporter/lbn.

“Lebanon Trade.” WITS, https://wits.worldbank.org/CountrySnapshot/en/LBN/textview.

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