Thursday, January 18, 2007

Azour says rancor over plan to increase taxes is misplaced

Azour says rancor over plan to increase taxes is misplaced
Private sector insists state should be reformed first

By Osama Habib
Daily Star staff

BEIRUT: Taxes and reforms do not mix: So goes the bottom-line conviction of some leading businessmen and bankers who believe that the government has brought up the subject of taxes too soon and without even consulting with trade unions and the business community. The immediate cause of consternation among the anti-taxation crowd is a reform proposal prepared by Finance Minister Jihad Azour and his team to persuade donor states meeting in Paris on January 25 that Lebanon is dead serious about cutting spending and increasing revenues. The government hopes that Lebanon will come away from the Paris conference with $5 billion in soft loans and grants.

Azour's proposal calls for a wide range of reforms, such as cutting waste, restructuring the National Social Security Fund, overhauling electricity, privatizing the telecom sector and improving social and educational benefits for Lebanese. But for many in the business community, all of these positive recommendations are overshadowed by two salient items: a proposal to increase the Value Added Tax from 10 percent to 12 percent in 2008 and to 15 percent in 2010; and a proposal to increase taxes on interest paid on bank deposits from 5 percent to 7 percent.

Although most economists, bankers, merchants and businessmen have voiced full support for Paris III, some have warned that the reform plan will fall apart unless the issue of higher taxes is temporarily shelved. Adnan Kassar, chairman of Fransabank and head of the Economic Committee, an association of business leaders designed to engage the government in debate over its economic proposals, said in a statement Wednesday that the government should not implement tax hikes before implementing reforms to cut waste in the public sector. Kassar said the committee would soon recommend amendments to Azour's proposal to make it more acceptable to the rest of the country. "The committee is also concerned about the tense political situation and urges all parties to work together for the sake of the country," the statement said.

In a separate statement released Wednesday, Azour said that the issue of taxes has been blown out of proportion. Defending the reform paper, Azour said that a family with a $1,000 monthly income will pay only an additional $8 a month if the VAT jumps from 10 percent to 12 percent. "The average Lebanese pays $40 a month for a generator. But if we succeeded in ensuring 24 hours of electricity in 2008 and 2009, then the Lebanese would save between $30 and $40 which he used to pay for the generator," Azour said. He also said that raising tax on interest rates on bank deposits will have a minimal effect on depositors. "An individual with a $50,000 bank deposit will only pay $5 a month if the tax on interest paid on deposits rises from 5 percent to 7 percent." Azour added that the basic point in the reform paper is cutting waste and spending.

1 comment:

MarxistFromLebanon said...

Problem is that taxes are part of the reform policies, any reform policies, which we call Fiscal Policies.

As for the income interest tax, it is not far, it should be progressive income tax, this way the poor get poorer

Last but not least, the WTO reform plan (Seniora's) proved disastrous everywhere it was applied whether in Eastern Europe, Africa, or Latin America.

Keep up the good articles

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