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Lebanon approves controversial tax hikes

Tax hikes have been labeled as an attack on the middle class and politicians warn they could spark a ‘revolution’ in the country

Image Credit: AP
Several protests have broken out this year over the proposed tax hikes, which are intended to fund public sector pay rises.
Gulf News

Dubai: Lebanese President Michel Aoun signed off on public sector wage increases and related tax hikes on Monday, the national news agency NNA said.

Aoun had held off ratifying the two laws since parliament approved them last month, amid concerns from businesses about the impact of more taxes on Lebanon’s fragile economy.

The public sector pay scale law has been under discussion for years.

The government had estimated that it would cost around $800 million, or $1.2 billion if it included certain pension increases.

The tax law raises value-added tax (VAT) by one percentage point to 11 percent and hikes corporation tax to 17 per cent from 15 per cent.

Several protests have broken out this year over the proposed tax hikes, which are intended to fund public sector pay rises.

In recent weeks, some public sector workers have also gathered in the streets calling for Aoun to finally sign the laws.

Legislation has been practically dormant in the past two years when Lebanon was without a president due to regional circumstances.

But last year, when Lebanon finally agreed to elect Michel Aoun to head the country, citizens were a bit more hopeful that at least basic pending matters such as salary increases for teachers, civil servants and the military could be finally adjusted.

But with the country suffering from a lack of tourism from Gulf states due to the pro-Syrian and pro-Iranian stances of some of its politicians, Lebanon has struggled to come up with the funds.

In March, around 2,000 protesters turned up outside of parliament to warn politicans against tax hikes and unfair practices.

It is widely known that members of the Iran-backed Shiite Hezbollah group are the only ones exempt from paying duties at the airport and harbour.

Shiite Parliament Speaker Nabih Berri is known to give his Amal party supporters huge electricity subsidies to the tune of $2b a year.

Proponents of the tax hikes say these steps are necessary to fund long-stalled new pay scales for government employees which include judges, teachers and military personnel.

The hikes in taxes were opposed by the Phalange and Future parties, which belong to the anti-Syrian March 14 coalition bloc.

Sami Gemayel, an MP from the Phalange party, previously accused the government of attacking the citizens’ pockets instead of corruption and warned such moves could spark a “revolution” in the country.