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In a candid and exclusive interview with Nabil Fahed, the Vice Chairman of the Chamber of Commerce of Beirut and Mount Lebanon, This Is Beirut delves into the pivotal matter of the proposed one-point increase in Value Added Tax (VAT) as outlined in the 2024 draft budget.
As Lebanon grapples with economic challenges, including fiscal deficits and monetary instability, the potential impact of the proposed one-point increase in VAT, as outlined in the 2024 draft budget, on retail and distribution businesses, particularly in the supermarket sector, is a matter of concern.
According to Nabil Fahed, Vice Chairman of the Chamber of Commerce of Beirut and Mount Lebanon, the consequences of such a consumer tax are regressive in nature. A seemingly modest 1% increment in VAT, he argues, translates to approximately a 10% surge when considering it as one part of an eleven-point tax. He asserts that this would significantly erode consumer purchasing power, leading to reduced spending and a tangible negative effect on consumers.
As the Vice Chairman of the Chamber of Commerce of Beirut and Mount Lebanon, Nabil Fahed sheds light on the chamber’s strategy for addressing the anxieties and interests of its members in light of the proposed VAT hike.
In his analysis, Fahed contextualizes the VAT increase within the broader budget framework. He points out that the government’s proposed budget carries a substantial deficit of approximately 14 to 15%, implying a severe revenue shortfall. To bridge this gap, the government might resort to borrowing or implementing what he terms as an “inflation tax” through the depreciation of the Lebanese pound, he explains.
Fahed emphasizes that such measures would negatively impact all economic sectors in Lebanon, inducing monetary instability and burdening those receiving Lebanese pounds, particularly within the public sector. He contends that the foremost priority should be a balanced budget, emphasizing stringent expense control over increasing taxes on citizens.
Nabil Fahed provides insights into the necessary measures and initiatives that, in his perspective, the Lebanese government should undertake to support economic recovery and foster a conducive business environment. He observes a nascent recovery in the private sector, characterized by a recent “mini boom,” attributed to income from tourism and sustained dollar inflows from manufacturing sector exports. To sustain this positive momentum, Fahed underscores the urgency of implementing the government’s economic recovery plan, which hinges on enacting critical legislation such as banking reform resolutions, banking secrecy laws, and capital control laws. He emphasizes that the passage of these laws is pivotal, irrespective of their specific content, as they play a crucial role in preserving the private sector’s revival which was witnessed over the recent months.
