## Tax and Customs Administration: An Urgent Need for Intervention

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**Canonical URL:** [Tax and Customs Administration: An Urgent Need for Intervention](https://www.imf.org/-/media/files/publications/hls/2023/english/hlsea202320.pdf)

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### Background
- IMF Fiscal Affairs Department (FAD) mission visited Beirut during the period September 25 – October 6 to launch a capacity development (CD) project organized jointly with the IMF Middle East Regional Technical Assistance Center (METAC).
- Purpose: confirm reform and CD priorities for the next 36 months to orient IMF CD project support.
- Review covered both tax and customs administrations, including an evaluation of current issues.

### Summary of Findings
- Four years into the ongoing economic crisis, operations in Lebanon’s tax and customs administrations face a real and immediate risk of collapse.
- Staffing and IT capacity
  - Staffing levels in the Value-Added Tax (VAT) Directorate, Revenue Directorate and Lebanese Customs Administration (LCA) are dangerously low.
  - IT is in a dire state:
    - One member of regular IT staff remaining in the LCA.
    - No IT staff remaining in the tax directorates.
    - The Ministry of Finance’s (MOF) IT Center has lost nearly half of its staff.
  - Without qualified IT workers, the eventual loss of the revenue agencies’ core IT systems and data is likely, which would halt operations and inflict further economic and fiscal damage.
- Service delivery and organizational capacity
  - Remaining public servants operate with high workloads and, particularly in tax administration, in unsuitable, poorly maintained facilities.
  - Revenue agencies continue to operate under antiquated, inefficient organizational models, with antiquated digital tools in tax administration and poor use of the tools that do exist in customs.
- Fiscal deterioration
  - Since 2018, total revenues have collapsed from 21 percent of GDP to 6.3 percent in 2022.
- Urgency
  - Immediate intervention is encouraged, including use of emergency powers if necessary, to protect continuity of critical functions.

### Recommended Immediate Actions (IT and key staff)
- Organize a focused project to protect critical functions, starting with IT operations, that should include:
  - Retaining existing experienced staff and recruitment of a small number of key technical specialists at market salary rates (examples given: IT staff, data analysts, risk analysts, and large taxpayer specialists including auditors).
  - Acquiring essential resources for critical functions (examples given: key IT hardware and software).
  - Securing training for specialists, from development partners if required.

### Medium-term structural options and financing mechanisms
- Prioritize both tax and customs administration in the existing budget.
- Consider structural reforms to enable modernization and staff retention:
  - Expediting the introduction of a semi-autonomous tax administration to provide increased flexibility to improve staff salaries.
  - Reviewing the use of customs service charges for their potential to support tax and customs modernization, noting that successful regional examples exist.
- Recognize that inaction and underinvestment will forgo substantial revenues and prolong the effects of the crisis.
- Additional priorities and implementation recommendations are provided in the accompanying technical assistance report.

*High-Level Summary Technical Assistance Report — Lebanon: Tax and Customs Administration: An Urgent Need for Intervention (December 2023).*

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_Source: https://www.imf.org/-/media/files/publications/hls/2023/english/hlsea202320.pdf_