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The private sector has lobbied MPs to secure substantial amendments to the 2024 budget proposal, which includes 133 articles.
All eyes are on the Parliament, where the parliamentary Budget and Finance committee is set to hold its last meeting on Monday to discuss amendments to the 2024 budget proposal. The modified version will then be sent to Parliament for further discussion and voting in a plenary session.
Various sectors of economic bodies have voiced their concerns, criticizing a 2024 Finance Bill whose figures bear no relation to the real economy. The aforementioned economical bodies are mainly exerting pressure on MPs to highlight the discrepancies in this text, which lacks any economic vision and aims solely at replenishing the Treasury.
Worse yet, this text is targeting the formal private sector, burdening it with taxes and levies, with amounts increased by up to twenty times in some cases, while this sector will play a leading role in any economic recovery project. Meanwhile, it totally overlooks the presence of a parallel economy, which the World Bank assessed at $1 billion in its latest report on Lebanon.
However, the private sector, as such, has successfully adapted its production costs in a crisis-ridden economic environment where infrastructure is virtually nonexistent. Furthermore, the private sector has successfully ensured the continuity of hundreds of thousands of jobs, while also revising the salary scale without awaiting recommendations from an executive authority that remains conspicuously absent.
The pinnacle of governmental irresponsibility lies in the clauses of Article 76 of the 2024 Finance Bill. In fact, Article 76 imposes a tax on inflation by compelling the formal private sector to pay taxes on the revaluation of stocks and assets due to the depreciation of the exchange rate. It also requires the sector to pay taxes on unrealized and hypothetical profits, all while disregarding the principle of product replacement cost.
In a nutshell, it is clear that the revenue projections for 2024 fall short of those achieved in 2023, ostensibly to justify an increase in taxes on the formal private sector and conceal the State’s inability to effectively address the expanding informal economy.
One example (among many), is the revenue projections for customs duties in the 2024 budget proposal, which stand at $148 million — a figure that falls considerably short in light of the actual economic conditions. A straightforward calculation shows that this figure should be at least $600 million. In Lebanon, where the yearly average import volume subject to customs duties was approximately $5 billion in both 2022 and 2023, and with an average customs duty rate of 12%, the $600 million figure is in line with reality.
Not to mention the likely commotion caused by the multiple references to the dollar exchange rate, to which various articles of the 2024 budget proposal must adhere.