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Local gasoline cheaper than oil producing countries

Jul 20

Local gasoline cheaper than oil producing countries

From major tax revenue source to a subsidized commodity

Local gasoline, at real market rate, has become cheaper than most countries, including oil producing countries thanks to the exchange rate support provided by the Central Bank (BDL) to fuel importers and the price control imposed by the State.

Most consumers’ incomes are based on the official LL1,500 to the dollar exchange rate. For them the effective cost of fuels and gasoline has not decreased.

The current price of 20 liters of 95-octane gasoline to the final consumer in Lebanon is LL24,300 which is roughly equivalent to $3 at an exchange rate of LL8,000. This translates into ¢15 per liter.

This means that the foreign exchange subsidy (assuming an exchange rate of LL8,000) amounts to around 66 cents per liter. If the taxes paid on gasoline are deducted, the net subsidy becomes 61 cents. Thus gasoline has become a subsidized commodity not a source of tax revenues to the Treasury.

Sources: Ministry of Energy and Water, InfoPro Research

Gasoline is subject to a valued added tax (VAT) of 11 percent plus an excise tax. The excise tax proceeds increased 5.2 percent last year to LL703 billion (around $466 million at the official exchange rate).

Gasoline imports rose by 4.4 percent in terms of volume to 2.1 million tons in 2019 compared with the previous year.

Consumers are paying in lira for gasoline at the official price of around LL1,500. Besides gasoline, the exchange value of imports of other basic commodities is supported by BDL such as diesel, butane, wheat, and medicine.