More merchants and traders in Lebanon voiced their strong objection to any attempt to raise the Value Added Tax under the current economic conditions. The merchant associations in Hamra and Burj Hammoud warned Tuesday that raising the VAT from 10 to 12 percent would have catastrophic results on businesses.
Finance Minister Mohammad Safadi presented his 2012 draft budget to the Cabinet two weeks ago which is yet to be discussed and approved by the ministers. One of the items in the draft budget which triggered wide condemnation from most ministers, economists, labor unions and merchants was a series of taxes that hit the consumers as well as businesses.
Merchants fear that any VAT increase would lead to an increase in the prices of commodities, which would also prompt a sharp drop in retail and wholesale sales. They also say a consumer tax will cause inflation to jump to 8 percent.
Safadi reiterated on many occasions that he is willing to drop the idea of raising the VAT on condition that those who strongly oppose it come up with a logical proposal to increase government revenues in order to finance ambitious infrastructure projects.
Merchants called on the government to reject calls for higher taxes, reminding officials that the growth is projected to be less than 3 percent at the end of the year. Most consumers complain that prices of many basic items already jumped by more than 20 percent four weeks ago after Safadi first revealed his 2012 draft budget.
Businesses in Lebanon were also determined to confront attempts by the government to raise the salaries beyond the financial means of most companies and firms in the country. The state Shura Council has rejected a Cabinet decision to raise the minimum wage from LL500,000 to LL700,000 and to offer an additional LL300,000 for those earning between LL1 million to LL1.8 million.
Fadi Gemayel, an industrialist, said that he is willing to accept a revision of salaries if this step was coupled by a series of measures to stimulate the economy and lure bigger investment in infrastructure projects in the country.