TUE 17 - 7 - 2018
Date: Oct 10, 2017
Source: The Daily Star
Lebanon: Parliament passes tax hikes, attention shifts to budget
Hussein Dakroub| The Daily Star
BEIRUT: In line with the top leaders’ political understanding and “national consensus” within the Cabinet, lawmakers from the country’s main blocs Monday passed a string of taxes in a move ensuring the continued implementation of the salary hike law for public sector employees.

Both Prime Minister Saad Hariri and Finance Minister Ali Khalil defended the approved tax measures, saying they were essential to funding the salary hike law, estimated to cost over $800 million annually, and protect the ailing economy, burdened by more than $75 billion in public debt and endemic budget deficits.

Although a number of lawmakers blasted the imposition of taxes that they say affects poor and low-income people, the Cabinet’s tax law passed smoothly with 71 votes for and five against, during a parliamentary session devoted to the public sector’s salary scale law and revenues to fund it. The passage prompted Speaker Nabih Berri to focus attention on the draft 2017 state budget.

The five votes against came from independent MP Butros Harb and the Kataeb party’s 4 MPs, while nine MPs abstained.

After chairing a morning and evening session, Berri scheduled three successive legislative sessions for Tuesday, Wednesday and Thursday next week to elect members of parliamentary committees and begin debating the draft 2017 state budget in a bid to ratify the country’s first fiscal plan in 12 years. On Oct. 17 Parliament begins its regular sessions that run until Dec. 31, ending the current extraordinary period.

Ahead of Monday’s evening session, Berri chaired a meeting of Parliament’s Secretariat to prepare the agenda of coming legislative sessions.

“It has been decided to hold a session on Tuesday, Oct. 17 ... to elect a secretary [of Parliament’s Secretariat], three rapporteurs and members of permanent committees,” Deputy Speaker Farid Makari said after the meeting. He added that if the election was quick, as expected, Parliament could begin studying the 2017 state budget and then ratifying it.

Berri stressed in Parliament that the state budget should be ratified before the end of this month.

Speaking to MPs at the end of the day, Hariri responded to lawmakers who criticized the tax measures by saying the salary scale law could not be implemented without new taxes. He warned that Lebanon would face a “disaster” if the salary hike wasn’t funded.

“Without taxes, it would have been better in popular terms, but six months later the [Lebanese] lira would have collapsed,” Hariri said, with Khalil sitting next to him.

“Frankly, I Saad Hariri, Speaker Berri and the president are not fond of imposing taxes, but we are responsible because we want [to implement the salary] scale without hurting the country,” Hariri added.

He rejected what he called “false information” by some that the $800 million collected by the Finance Ministry last year through a tax on bank profits from the Central Bank’s financial engineering was enough to cover the salary increases.

“The [salary] scale is for each year, and each year we have to find LL1.2 trillion to 1.4 trillion to finance it, which means finding taxes to cover this scale,” he said.

The PM hit back at politicians who called on the government to secure the funds by fighting rampant corruption in the public administration and improving tax collection. “Yes, we want to fight corruption. But all those who are calling to fight corruption have served in previous governments. What have they done? Have they fought corruption?” he asked.

Hariri said the state budget would be ratified by Parliament and the government would carry out an audit of previous years’ extra-budgetary spending. He stressed that a large portion of the taxes targeted companies, banks and those who can afford it.

Hariri refuted accusations by Kataeb Party head MP Sami Gemayel that the government imposed taxes to finance next year’s parliamentary elections. “I don’t finance elections,” Hariri stated.

Khalil then said that passing taxes would protect the salary scale.

“We protected the country’s financial situation. We cannot continue without reforms that will restore balance to the financial situation,” he said. Khalil added that the tax measures were designed to prevent adding to the accumulating budget deficit. He said that 87 percent of the tax measures would not affect the poor.

Speaking to reporters immediately after Hariri and Khalil, Gemayel argued that “what happened today was not to finance the salary scale, but to float the state finances. There was no need for taxes.” He added that 80 percent of the taxes would affect all Lebanese people.

Gemayel, who launched the appeal of the previous tax hike law before the Constitutional Council last month, said his party would study the new bill to assess the constitutional validity for another challenge.

As well as the tax amendments approved by Cabinet, Monday’s session discussed allowing the government to delay the public sector pay hike in lieu of complementing taxes and passing the 2017 draft budget without the auditing of previous years.

The Cabinet’s amended tax bill came after the Constitutional Council annulled a previous iteration in its entirety last month over constitutional violations. However, local media outlets said Monday’s approved tax measures did not contain any substantial amendments.

During the evening session, lawmakers agreed on a new LL80,000 ($53.10) import tax on shipping containers into Lebanon.

They also approved yearly taxes to be paid by seaside property owners. Economic experts have repeatedly said the government could raise some $500 million annually if it reached a settlement with stewards of seaside public properties technically owned by the government.

MPs also approved a 20-percent tax on national lottery prizes and a two-percentage point rise to 7 percent on taxes on bank deposit interest.

Parliament went through the tax bill line by line, voting on each article by roll call, including an increase to VAT from 10 percent to 11 percent.

MPs also endorsed a LL2,500 ($1.65) fee on land-line phone bills, and LL250 ($0.17) on prepaid mobile charge cards.

They also agreed a LL6,000 ($3.98) fee per ton of produced cement, as well as a LL250 ($0.17) fee per packet of cigarette, a 10-percent levy on cigars and LL 2,500 on every kilo of nargileh tobacco.

During the session, Berri announced he had referred a draft law to freeze the salary scale to Parliament’s Finance and Budget Committee.

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