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French Version

Forum calls for more ‘progressive taxation’ (Daily Star)

Forum calls for more ‘progressive taxation’
Lebanon’s poor contribute over 70 percent of treasury’s revenues
Speakers claim country is haven for rich, demand higher band of taxes to help offset burgeoning national debt

“There are two certainties in life, death and taxes.” This famous quote by American author Mark Twain lingers in the minds of most Lebanese as they struggle to make ends meet and pay part of their meager salary to the government.

Governments around the world impose taxes to finance public education, health, social welfare and infrastructure. But in Lebanon’s case, the majority of taxes cover the cost of debt servicing, which has been bleeding the country dry for the past seven years.

Bearing these facts in mind, a group of highly respected economists and senior officials, at the invitation of the Progressive Socialist Party (PSP), debated Wednesday the feasibility of easing the tax burden on low-income earners, yet increasing the revenues of the state at the same time. “The poor class has been bearing the brunt of taxes in Lebanon. It’s time now to revise the tax system so that the tax burden falls more on the rich,” the leader of the PSP, Walid Jumblatt, told the participants in his opening remarks. Jumblatt said his party foiled an attempt by the government to tax pensioners.

Echoing similar views, public financier Ghassan Ayash stressed that the tax burdens on the middle- and low-income strata of society have mounted since the end of the war. He added that those in charge of the financial policy believe that the Lebanese pay significantly lower taxes than other countries.

Ayash said that comparative studies indicate that the tax burden in Lebanon is the lowest in the region and the world. “In our view, the reason behind the complaint lies in the poor distribution of the tax burden in the country,” he said. He added that limited-income families are bearing the brunt of taxes while the rich live in a tax haven. “Tax has lost its meaning as a method for social solidarity and redistribution of wealth, and instead has become a means to pay the state for its services,” Ayash said. “This is the basis of radical liberal thinking.”

He added that the combined tax revenues were not even sufficient to cover the interest rates on Treasury bills.

Other speakers suggested different approaches to the tax problem. Ghazi Youssef, the secretary-general of the Higher Privatization Council and advisor to Prime Minister Rafik Hariri, suggested that the time has come to consider progressive taxation.

A progressive tax system means that the government slaps higher taxes on those who are earning higher incomes, a policy liberal and social economists have also advocated.

Income tax in Lebanon ranges between 5 and 20 percent of income, but economists say that low-income families cover more than 70 percent of total taxes in the country. Youssef said the Finance Ministry is currently preparing laws that would pave the way for unified or comprehensive tax. The tax will be introduced next year, according to sources from the ministry.

Youssef added that there should also be revision of other taxes that were implemented recently.

Finance Minister Fouad Siniora introduced this year the 5 percent tax on interest on deposits, which is supposed to generate about LL216 billion ($144 million) in revenues each year.

Economist Kamal Hamdan said the 5 percent tax on interest rates was a move in the right direction. “But more is needed if we wanted to bail out the economy from its current crisis,” he said, adding that it would not hurt if those who have bigger deposits pay more. “In France, the taxes on interest rates go up to 50 percent. We don’t want these levels, but 5 percent is still too low,” he said. Hamdan also commented on the value added-tax (VAT) introduced last year. “A 10 percent flat VAT should also be reconsidered because in most countries this rate ranges between 3 to 15 percent, depending on the commodity,” Hamdan said.

He also proposed taxes on real estate, adding that in some countries this type of tax represents more than 50 percent of government revenues. According to Hamdan, there are 1.2 million flats and houses in Lebanon, one quarter of which are vacant.

Beirut 26-05-2003
Osama Habib
The Daily Star

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