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Beirut, Lebanon – Lebanon is looking at raising cash taxes and tariffs and other retroactive policies to create a lion’s share of the state’s revenue lion this year, according to a copy of the country’s 2022 draft budget shared with Al Jazeera – experts warn that moves are already exacerbating financial difficulties . millions of Lebanese.
The draft budget calls for an increase in exchange rates that determine customs duties, as well as an increase in other import and trade rates; analysts said the cost of imports would rise and feed already obvious inflation.
Although the proposals do not have a clear deadline for introducing these changes, empowering Finance Minister Youssef Khalil allows for a change in exchange rates at different rates.
“There should be a clear framework for how and when these exchange rates will be adjusted,” Mohamad Faour, a professor of finance at the American University of Beirut, told Al Jazeera. “It’s a half-hearted attempt to do something that resembles a budget,” he said, adding that he acknowledged that “the multi-rate exchange regime will continue in the near future.”
Lebanese officials have said in recent days that internet and telephone service fees may also be included in the cards.
The proposed changes are expected to triple the government’s revenue from value added tax (VAT). Critics have long argued that VAT is retroactive because it harms the poor disproportionately by consuming a larger share of their income.
Faour said the government said it was “fair” to increase tax revenues, but said it would “increase economic inequality” by focusing on regressives instead of progressive taxes.
“Collection [the] Most of the tax revenue is fair, but we are seeing aspects like maritime property that do not include any taxes, ”he said, adding that this policy alone could generate millions for the state.
The World Bank last year recommended that Lebanon impose a wealth tax.
The draft budget continues to make great strides in Lebanon’s poor, polluting and unreliable electricity sector, which provides only a few hours of government-funded electricity per day.
Adding difficulties
The Lebanese pound has lost more than 90 percent of its value in the last two years and is currently trading at between $ 23,200 and $ 1.
Lebanon’s central bank, Banque due Lebanon, continues to draw millions of dollars to protect the pound from declining foreign reserves. And more than three-quarters of the country’s population live in poverty.
Lawmaker Ali Darwish, who is also an adviser to billionaire Prime Minister Najib Mikati, told Al Jazeera that the budget will work at three U.S. dollar exchange rates. The first, a $ 1,500 official missing rate of £ 1,500, will apply to state contracts. Second, the rate of £ 8,000 to $ 1 will apply to customs duties, telephone and internet bills and other fees. Third, the prevailing parallel market rate will apply to state expenditures that require payment in foreign currency.
“In some ministries like telecommunications or energy, you have machinery that you can only import in dollars,” Darwish said. “State contracts will remain at 1,500, and the public sector will not yet get a raise, but a financial reward.”
Before entering the Lebanon crisis more than two years ago, Lebanon’s minimum monthly wage was the equivalent of $ 400. It currently costs about $ 20.
“It can be hard to grow [fees] until the public sector pay rise, so maybe in the future, ”Darwin said.
Telecommunications Minister Johnny Corm said in a radio interview that the telecommunications sector needs to change its exchange rate to the $ 9,000 dollar since last week’s Internet cuts cut the country’s fuel shortage.
And according to Darwish, the Lebanese government will keep its sick public services running at a neutral pace while securing a World Bank loan for a rationing card program aimed at providing temporary funding to millions of impoverished Lebanese.
No reform, no way out of the crisis
The Lebanese government, which has almost failed, hopes to approve the draft budget as soon as possible, but has not yet finalized the economic recovery plan needed to unlock billions of dollars in foreign aid, including a bailout from the International Monetary Fund (IMF).
Meanwhile, the country has made efforts to implement some of the financial and accountability reforms required by the IMF. These include forensic audits of the central bank and state institutions and the law on capital controls. Millions of Lebanese are left out of their U.S. dollar savings accounts in Lebanese banks and fear they will never get their money back.
Although Prime Minister Mikati hopes to reach an agreement with the NDF soon, Darwish MP says there is still no clear deadline.
“We have no stability, neither economic nor political,” Darwin said. “It’s not clear yet.”
The budget, experts say, should be accompanied by ongoing reforms and an economic recovery plan approved by the IMF to restructure the economy and stabilize the currency.
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