I recently had the opportunity to attend a seminar on foreign investment in Libya, which has spent this year making great efforts to attract overseas investment in its oil fields. American, Japanese, and French countries are winning the largest number of concession agreements in recent bids, but there is much left to be explored. And investment in Libya has become simplified and more profitable due to the recent enactment of the new Investment Law, liberalizing regulations on stock ownership, wages, employee citizenship requirements, and reducing taxes (the top income rate has been dropped from 90% to 35%). But one item remains unchanged: the Jihad Tax, a flat 4% tax on all corporate profits and a 3% tax on high-wage individuals.
Just what is this so-called Jihad Tax? It was founded in the 1970s to aid the Palestinians in their struggle against Israel. More recently, the fund has been used to build Islamic universities and proselytize. The use of the proceeds today are unclear. The US-Libya Business Association, which has a clear interest in calming any worries over the tax, has stated: “It is unclear to USLO where the proceeds of this tax flow, but in light of Libyan policy, one can be reasonably certain this tax is not used to subsidize Muslim fundamentalist organizations.”
I suppose I’m confident that’s correct. (If a country wanted to use taxes on oil to finance terrorist organizations, they probably wouldn’t be so obvious as to call it the “Jihad Tax,” the very existence of which causes raises eyebrows among western investors.) But considering its use in the past to blow up Israelis, one has to wonder where the money is going.