The Lebanese Parliament approves the 2024 budget law within the constitutional deadline and awaiting the signing of its decree in the government (Al Jazeera - Archive)
Beirut -
Contrary to what the Lebanese had experienced in previous years, the Lebanese Parliament approved the 2024 budget law, within the constitutional deadline. Pending the signing of its decree in the government, in its first session, economic experts agree that it is a budget without an economic vision, and does not include radical reforms that would save Lebanon from the bottom of collapse, in light of the paralysis of state institutions and an ongoing presidential vacancy since October 2022, and the dangers of the outbreak of war looming large. The southern front between Hezbollah and Israel.
Once again, the 2024 budget perpetuates the “lack of tax justice” by basing most of its revenues on indirect taxes that affect all citizens, especially since a large portion of the budget expenditures goes to the wages and salaries of public sector employees. The number of these people is about 210,000 civilian workers, and about 120,000 military personnel. The International Monetary Fund has previously called for the restructuring of the public sector, as one of the conditions for the success of negotiations with Lebanon, which have faltered since the signing of an employee-level agreement two years ago.
The most prominent budget items
The approval of the 2024 Budget Law, on January 26 of this year, without interruption of accounts, came after two days of sharp debates within Parliament between representatives, and after amendments were made to the amended draft by the Parliamentary Finance and Budget Committee.
The budget formally equated revenues with expenditures, so that its deficit was 0%, but it maintained a wide pluralism in its exchange rates, according to observers (Al Jazeera)
Observers point out that the budget formally equated revenues with expenditures, so that its deficit was 0%, but it maintained a wide pluralism in its exchange rates. The official exchange rate has been 15,000 liras since last year (after 3 contracts were 1,507 liras), while the exchange rate on the black market exceeds 89,000.
Observers believe that while the budget did not mention how to address and restructure the public debt, which exceeds $100 billion, it also did not address measures to help address the losses of the banking system, which Lebanon officially estimated in 2021 at about $70 billion. When approving the 2024 budget, Parliament placed the responsibility for re-determining the deposit exchange rate on the acting Governor of the Bank of Lebanon, Wassim Mansouri.
The budget focused on enhancing its revenues from indirect taxes, as the pound rose tens-fold to be in line with the dollar exchange rate on the black market. It affected most basic transactions for citizens, such as municipal fees, travel, registration papers, and various consumption and public services taxes.
While the budget imposed exceptional fines of 17% on non-individual beneficiaries of the “banking” platform, it was noteworthy that Parliament approved raising the tax imposed on financial companies from 17 to 25%, in addition to imposing a tax on the revenues of movable capital, such as bonds and stocks, which he owns. Residents outside Lebanon.
Backgrounds and implications of the 2024 budget
The most important paradox in the 2024 budget, from the point of view of journalist and economic expert Ali Nour El-Din, is that for the first time in 20 years, the government refers the draft budget to Parliament within the constitutional deadline. Because in the event of a presidential vacancy and a legal dispute over the legality of the legislation, “if Parliament had not voted on it, dropped it or amended it by the end of this month, the government could have approved it as it is by decree.”
The tax correction did not come within a reform plan and financial vision, but rather an accounting vision to cover the minimum expenditures with the minimum amount of imports, according to an expert (Al Jazeera).
Nour El-Din told Al-Jazeera Net that the government sent the budget with a huge tax basket, and then Parliament made some amendments to it, "knowing that most of the forces in it are represented by the government, so its sessions took on a showy and populist character."
Nour El-Din believes that despite the difficulty and repercussions of raising indirect taxes on people, there was an urgent need for such measures in line with the actual value of the lira in the market.
But the problem, in his opinion, is that the tax correction did not come within a reform plan or financial vision. Rather, the budget seemed to be an accounting vision to cover the minimum expenditures with the minimum amount of revenues.
Here, lawyer and tax expert Karim Daher, in an interview with Al Jazeera Net, considers that the authority’s resort to enhancing its revenues with indirect taxes is the laziest, most harmful, and least fair method for all citizens, and does not serve their interests as long as it is not accompanied by raising the level of services and social protection. He says, "Indirect taxes constitute more than 75% of the total taxes in Lebanon, while direct taxes do not exceed 15%. This means that it is a deliberate exemption for owners of wealth and capital from paying taxes fairly in exchange for enhancing their ability to evade taxes." It is also considered that not attaching the budget to an account will allow for a lack of transparency when securing its revenues and paying its expenses.
However, Daher finds that raising the tax on financial companies to 25% somewhat broke the “lobby of banks and money changers,” especially since it was linked to imposing a tax on the profits of beneficiaries of the “banking” platform.
Raising the tax on financial companies to 25% constitutes a break in the “lobby of banks and money changers” (Al Jazeera)
The problem with the budget, according to Daher, is that it is piecemeal measures, without a study based on scientific foundations. He says, “The state’s role revolves around protecting society and the economy, increasing wealth and distributing it well, and these are 4 items that the budget does not achieve.”
Reflections
Economist Mounir Younes believes that raising taxes amounted to about 46 times in this budget, in order to correct the old fees before the collapse of the lira and to keep pace with inflation. However, it cannot be described as a reform budget, because its payment will be from the pockets of citizens after 85% of them have been impoverished, according to international estimates. Yunus refutes the impact of the budget on people according to the following:
Those with income in lira, who are the general public, will have their tax burdens increased 46 times without a fundamental correction in salaries and wages, specifically among public sector employees.
Those with dollarized incomes or those who receive dollars, who are a small percentage of the Lebanese, will not be greatly affected by the tax increases, in exchange for a decline in their ability to save.
Tax evaders are the ones who benefit most from this budget, as well as previous ones.
In parallel, Ali Nour El-Din finds that the current budget does not restore the effectiveness and regularity of the role of the public sector, nor does it address the fate of banks and deposits, leaving their management to the Central Bank, while linking them to two laws awaiting parliament, the law to restore order in the financial sector, and the law to restructure the banking sector.
Meanwhile, Karim Daher believes that the government and Parliament do not essentially have a plan to return deposits, while “the budget did not meet the various requests of the International Monetary Fund, after agreement with it, in light of the current situation, became an unattainable event.”
Source: Al Jazeera