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11.12.25

Digital Technology in Lebanon: A tool for fiscal and financial inclusion?

Karim Daher

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The opening of borders and the technological revolution of recent years have allowed and even facilitated unrestricted intrusion by multinational enterprises (MNEs) and foreign tech companies into developing countries such as Lebanon—due to the lack of any specific public contract tools or legal framework. Instead, these foreign companies use tailored tax optimization strategies and subtle engineering to decrease the burden of the tax and hence compete with local businesses. This state of affairs deprives national economies of significant resources to invest in infrastructure, education, social welfare and innovation. This situation contributes, at the same time, to the development of the parallel or informal economy and leads to a proliferation of tax evasion among local economic actors and agents.

However, the sheer power of these foreign players and, notably, the internet giants in the digital economy is such that any change or restriction in their operation and development would lead to their withdrawal and the discontinuation of their services. This is particularly true in a relatively small and weak economy such as Lebanon’s, and would therefore have negative or even disastrous repercussions on a slew of local players and consumers. Notably, most of these foreign players and internet giants are merely service platforms and intermediaries using the networks of local telecommunications operators, which are themselves subject to all state requirements and obligations.

That is why the past two decades have seen other states begin to consider appropriate tax regulation at the local and international level to counter this exploitation. The aim is to finally apply strict rules to these tech companies, which abuse international treaties and legislative loopholes to hide or minimize their huge profits while making extensive use of local networks and other infrastructure. The Organization for Economic Cooperation and Development (OECD), for its part, has been working since 2013 to develop anti-abuse clauses (BEPS and MDR) and disseminate them on a large scale in the hopes of harmonizing standards and organizing the fight against tax abuse and tax evasion.

But Lebanon still lags behind. In a country undergoing such a unique financial crisis, where broadening the tax base is becoming a national priority, could developing local digital technology be a path toward financial inclusion or exclusion?

The study aims to assess how Lebanon’s tax system can adapt to the realities of a rapidly digitalizing economy. It seeks to diagnose structural weaknesses and legal loopholes that enable tax avoidance and evasion—particularly by large digital corporations—and to propose reform measures that promote fairness, efficiency, and international compliance. By addressing both domestic deficiencies and global cooperation frameworks such as the OECD’s BEPS initiative, the study ultimately strives to chart a pathway toward a modern tax regime capable of regulating digital transactions, integrating the informal economy, and ensuring greater equity and transparency in revenue collection.

The paper argues that Lebanon’s tax system is structurally ill-equipped to address the fiscal and regulatory challenges posed by digitalization. Despite rapid technological change, tax legislation remains outdated, fragmented, and vulnerable to manipulation by both multinational digital firms and local actors. The report identifies weak enforcement, the absence of digital monitoring tools, and the persistence of informal economic activity as key sources of inefficiency and inequity. It contends that the system’s design favors rent-seeking and avoidance rather than fairness and productivity, with tax rules that neither capture digital profits nor ensure horizontal equity among taxpayers. To address these shortcomings, the study recommends a comprehensive reform agenda anchored in modern digital governance. This includes strengthening tax administration through artificial intelligence and data analytics to detect unregistered entities; introducing a universal Tax Identification Number (TIN) to integrate the informal sector; adopting international standards such as the OECD’s BEPS framework to tax digital services based on “significant economic presence”; and tightening rules against transfer pricing and fictitious transactions. Together, these measures aim to build a transparent, inclusive, and technologically adaptive tax regime capable of supporting Lebanon’s fiscal sustainability and social justice goals.

This report is composed of two sections: Section one describes the current tax situation using practical examples in the field and summarizes the tax regulations in place. The second section explores ways and means of countering abuses and misuses, as well as making good use of digital technology as part of a comprehensive reform of the national tax system. Section three highlights international developments that are currently underway. Section four concludes with the key findings.


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