Some companies breach their tax obligations by either failing to submit their due tax declarations- income tax particularly- or defaulting on their tax payments (amended return penalty, delayed tax declaration penalty, penalty for delayed submission of auditing report, etc). When such offences are detected, competent authorities at the Ministry of Finance respond by fining the offender. Fines vary depending on the size of due amounts (starting at 5%) and a penal interest of 1% is added for every month of delay.

 

Law no. 662 dated February 4, 2005 established the essentials for penalty adjustments according to taxation laws and authorized the Minister of Finance to renew these essentials and approve penalty reductions, except for those exceeding LBP 1 billion, in which case the approval of the Cabinet is mandatory. The law stipulated the percentage of reductions as illustrated in Table 1.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The law on taxation and fining forces the Minister of Finance to reduce the penalty. And since the real beneficiaries from this measure are major, not small taxpayers, the state loses out on huge revenues during the reduction process as shown in Table 2, which illustrates a sample of companies that benefitted from the law and had their penalties reduced from LBP 30 billion to just LBP 5 billion. 

 

The following sample includes only seven companies, let alone the hundreds of other violators which deprive the state of hundreds of billions of pounds.