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A quick overview of various articles and measures in the 2024 budget proposal is enough to grasp its ultimate goal: to increase Treasury revenues and fill the anticipated deficit, regardless of its hands-on consequences. Its actual implementation will finalize the cycle of Lebanon’s collapse.
A wiser approach would have been to simply reduce expenses instead of creating new taxes and charges, some of which go against ethical principles.
With no clear fiscal or economic policy vision, the 2024 budget proposal seems to be focused on accumulating stacks of banknotes in the State’s treasury, whether in Lebanese pounds or in hard foreign currencies.
The mere concept of reforming State institutions has become a banality as well as an amusing notion to the current ruling class. In fact, the unwillingness to undertake such an endeavor has left the population crestfallen, especially considering that over the past four years, more than three hundred thousand Lebanese citizens have chosen to emigrate.
Tax Dollarization
The option of dollarizing taxes will only further impoverish the least-favored without significantly replenishing the Treasury’s coffers. It will also run counter the efforts to fight inflation and maintain the stability of the pound’s exchange rate against foreign currencies.
In reality, Lebanon is not comparable to the United States, as it lacks the means to issue dollars. Taxpayers will hence be left with no other alternative but to resort to the parallel market, given that private sector employees do not receive their entire salaries in hard currencies. As for government employees’ families, they will have to navigate through these dire circumstances. In short, economic recovery ensues only when the value of the national currency is boosted, not the other way around.
By the same token, one of the measures of the 2024 budget allows taxable individuals to pay their tax liabilities from their bank accounts in “lollars,” calculating its value based on 40 percent of the US dollar exchange rate against the Lebanese pound determined by Sayrafa, the Lebanese Central Bank’s platform. This contradicts the very logic aimed at curbing the expansion of the money supply in Lebanese pounds, a challenge that the Central Bank’s Council is strenuously addressing to relieve pressure on the pound.
The Repatriated Bodies
As part of the 2023 budget proposal, a new tax has been introduced on the repatriation of dead bodies which is set at two per thousand. Here lies the real issue. Many economic experts have spoken out to denounce this tax, which defies all principles of ethics and common sense. They have also questioned the calculation mechanism of this tax: Is it based on the price of the coffin in which the deceased’s body is transported or on the deceased’s estate? It is an absurdity and an aberration.
Fast Services
In addition, a new fee known as “fast and emergency service in public administrations” has been introduced. This fee would be distributed as follows: 50% for the employees of the department that provided the service, 5% for employees of control agencies, 10% for employees of administrations that did not provide the service, 15% for the civil servants’ mutual fund, and 20% for the Public Treasury.
VAT Set at 12%
Regarding the Value Added Tax (VAT), it is set to increase to 12%. While this tax hike promises a secure boost to the State’s revenues, it will increase the burden on consumers, mostly affecting the lower-income segment, who will bear a disproportionate burden due to their limited incomes. The increase in VAT will affect electricity tariffs, internet fees, water charges, and all public utility bills.
Going Back to the Lebanese Central Bank
Finally, Article 23 of the proposed budget stipulated that “fees for all types of services offered by the State across its various institutions will be paid in Lebanese pounds.” However, in emergency cases, these fees may be reevaluated in foreign currencies and become mandatory according to a scale established by the Lebanese Central Bank. Given the crisis situation and the pressing need, this implies that all public administration services might potentially be priced in dollars.
At this point, the lingering question on every Lebanese person’s mind is: What comes next, and what kind of unexpected surprises does the future have in store?
