Every Lebanese government routinely and systematically tracks the state's expenditures and revenues. Yet, they consistently failed to accurately assess the substantial revenue losses, totaling around $3 billion. Despite persistently seeking assistance from the international community, they remain unwilling to implement the much-needed reforms that are crucial for the improvement of public finances and the country's economic recovery.
The common issue among all these governments is their belief that raising taxes will inherently increase Treasury revenues, rather than tackling the root problem by addressing illegal activities and working on an overall reform plan of the public administration.
Once these issues are phased out, not only will the state revenues increase, but Lebanon's image overseas will also improve, which will in turn attract investments and foster a conducive business environment.
This is Beirut pinpointed some of these missed revenues opportunities.
Illegal Internet: $60 Million
The measures implemented to fight illegal internet activities are expected to generate around $60 million for the public treasury, stated caretaker Minister of Telecommunications Johnny Corm to This is Beirut. He emphasized that the objective of the new law on illegal internet is to prevent monopolies in certain areas, ensuring that network owners will pay LBP 550,000 per month per subscriber.
Tax Evasion: Around $1.5 Trillion
According to Nassib Ghobril, Chief Economist of Byblos Bank, and based on his calculations spanning from 2010 to 2018, the Lebanese government was losing between $1.2 billion and $1.5 billion annually due to tax evasion.
Smuggling: $2 Billion
Smuggling has been the leading cause of the loss of nearly $2 billion per year for the Lebanese Treasury. Currently classified among the most corrupt countries worldwide, Lebanon has taken no significant action to curb this crushing issue. No reforms or stringent laws have been enacted. The airport, port and land borders remain porous, with minimal state presence.
EDL: $400 Million
The issues encountered by Electricité du Liban (EDL) are certainly linked to substantial technical losses resulting from outdated infrastructure. However, they are mainly aggravated by illicit connections, meter tampering and the lack of bill collection in some areas. These issues are mostly prevalent in underprivileged neighborhoods, areas under militia control and refugee camps.
Due to issues such as non-billing, failure to collect payments or refusal to pay, 40% of the electricity produced does not generate revenue for EDL, with 21% attributed to illegal connections. Each year, Electricité du Liban loses nearly $400 million due to illicit connections and unpaid bills. Additionally, Lebanese public administrations owe the autonomous office $233 million in backlog.
Land Registry: LBP 36 Trillion
Land registry services in Mount Lebanon have been at a standstill since October 2022, following a slowdown since early 2020. Over 50,000 land registration procedures in this governorate are pending.
According to the president of the Parliamentary Finance and Budget Committee, MP Ibrahim Kanaan, these 50,000 procedures represent nearly LBP 10 trillion in tax revenues the state has missed out on, based on 2022 revenue figures.
According to the 2024 budget, land registry revenues are estimated at LBP 36 trillion, which accounts for 15% of tax revenues. Ghobril estimates the daily losses in land registry services at $1.55 million, based on an exchange rate of LBP 89,500.
Public Sector Strike: $13.3 Million per Day
Each day of an open strike called by civil sector employees costs the Lebanese state nearly $400,000, according to figures from a study by the Ministry of Labor. Nassib Ghobril emphasizes that if public administrations remain closed due to any potential strike, the Treasury will lose $13.3 million every day. He highlights that according to the International Monetary Fund (IMF), state revenues dropped from 21% of GDP in 2018 and 2019 to 8.6% in 2023, mainly due to the public sector strike that has been ongoing for over two years.
Audiovisual Piracy: Everlasting Losses
The annual turnover of the audiovisual sector is estimated at $40 million, yet the state collects minimal revenue from this sector. Usage fees for public infrastructure go unpaid, and many entities also fail to fulfill obligations regarding taxes on broadcasting rights, VAT and profit taxes.
The common issue among all these governments is their belief that raising taxes will inherently increase Treasury revenues, rather than tackling the root problem by addressing illegal activities and working on an overall reform plan of the public administration.
Once these issues are phased out, not only will the state revenues increase, but Lebanon's image overseas will also improve, which will in turn attract investments and foster a conducive business environment.
This is Beirut pinpointed some of these missed revenues opportunities.
Illegal Internet: $60 Million
The measures implemented to fight illegal internet activities are expected to generate around $60 million for the public treasury, stated caretaker Minister of Telecommunications Johnny Corm to This is Beirut. He emphasized that the objective of the new law on illegal internet is to prevent monopolies in certain areas, ensuring that network owners will pay LBP 550,000 per month per subscriber.
Tax Evasion: Around $1.5 Trillion
According to Nassib Ghobril, Chief Economist of Byblos Bank, and based on his calculations spanning from 2010 to 2018, the Lebanese government was losing between $1.2 billion and $1.5 billion annually due to tax evasion.
Smuggling: $2 Billion
Smuggling has been the leading cause of the loss of nearly $2 billion per year for the Lebanese Treasury. Currently classified among the most corrupt countries worldwide, Lebanon has taken no significant action to curb this crushing issue. No reforms or stringent laws have been enacted. The airport, port and land borders remain porous, with minimal state presence.
EDL: $400 Million
The issues encountered by Electricité du Liban (EDL) are certainly linked to substantial technical losses resulting from outdated infrastructure. However, they are mainly aggravated by illicit connections, meter tampering and the lack of bill collection in some areas. These issues are mostly prevalent in underprivileged neighborhoods, areas under militia control and refugee camps.
Due to issues such as non-billing, failure to collect payments or refusal to pay, 40% of the electricity produced does not generate revenue for EDL, with 21% attributed to illegal connections. Each year, Electricité du Liban loses nearly $400 million due to illicit connections and unpaid bills. Additionally, Lebanese public administrations owe the autonomous office $233 million in backlog.
Land Registry: LBP 36 Trillion
Land registry services in Mount Lebanon have been at a standstill since October 2022, following a slowdown since early 2020. Over 50,000 land registration procedures in this governorate are pending.
According to the president of the Parliamentary Finance and Budget Committee, MP Ibrahim Kanaan, these 50,000 procedures represent nearly LBP 10 trillion in tax revenues the state has missed out on, based on 2022 revenue figures.
According to the 2024 budget, land registry revenues are estimated at LBP 36 trillion, which accounts for 15% of tax revenues. Ghobril estimates the daily losses in land registry services at $1.55 million, based on an exchange rate of LBP 89,500.
Public Sector Strike: $13.3 Million per Day
Each day of an open strike called by civil sector employees costs the Lebanese state nearly $400,000, according to figures from a study by the Ministry of Labor. Nassib Ghobril emphasizes that if public administrations remain closed due to any potential strike, the Treasury will lose $13.3 million every day. He highlights that according to the International Monetary Fund (IMF), state revenues dropped from 21% of GDP in 2018 and 2019 to 8.6% in 2023, mainly due to the public sector strike that has been ongoing for over two years.
Audiovisual Piracy: Everlasting Losses
The annual turnover of the audiovisual sector is estimated at $40 million, yet the state collects minimal revenue from this sector. Usage fees for public infrastructure go unpaid, and many entities also fail to fulfill obligations regarding taxes on broadcasting rights, VAT and profit taxes.
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