Lebanon's complacent politicians choose more taxes over reforms
As the Lebanese government passed a new budget that includes tax hikes and spending increases, economic experts are calling on politicians to instead focus on fighting corruption and money waste in state institutions.
The large protests in Lebanon on March 15, which were triggered by fresh tax hikes passed by the Lebanese parliament, underline the population’s unease with the politicians’ disastrous governing policies that focus on increasing revenues without implementing much-needed reforms, in light of a failing economy plagued by corruption and waste.
“The current government policies are completely upside down,” Nassib Ghobril, the chief economist at Byblos Bank, told Al-Monitor. “After six years of [economic] slowdown, the new budget — the first to be passed by the Cabinet in 12 years — should stimulate the economy and reduce spending; it has done neither.”
On the contrary, the budget includes increased taxation and spending. Higher taxation means a slowdown of the economy that is at an all-time low, plummeting last year to 1% growth, according to Ghobril. As a measure of comparison, Lebanon’s economic growth rate was 1.3% in 2015 while the growth rate of the United Arab Emirates was 3.1% in the same year.
The new taxation is expected to have repercussions on Lebanon’s growth rate in 2017, as it impacts all economic sectors and social classes. A case in point is the value-added tax, which was raised from 10% to 11%, as well as hikes in other taxes on financial transactions. Lebanese independent economist Ghazi Wazni told Al-Monitor that a tax of 6,000 Lebanese pounds (about $4) was imposed on the production of each ton of cement; taxes on bank deposits will also increase from 5% to 7%, and on corporate profits from 15% to 17%; and a 15% tax on real estate gains was also introduced.
