Lebanon's new taxes to fund pay increase for Ministers and MP's

Published September 18th, 2012 - 07:18 GMT
New taxes to fund a pay rise for Lebanese Government and MPs, although Prime Minister Najib Mikati could attempt to delay the increase
New taxes to fund a pay rise for Lebanese Government and MPs, although Prime Minister Najib Mikati could attempt to delay the increase

The Cabinet agreed Monday to slap taxes on profits from real estate, lottery wins and investment licenses to partially fund the new salary scale. It neither specified how much the taxes would be nor when they would start to be applied.

But discussions on the salary scale will continue Tuesday and Wednesday in a bid to seek means to finance the hikes in wages of public employees.

The Cabinet also agreed to keep the proposed increases in the wages of ministers and members of Parliament but stressed that the issue would be further discussed in Parliament once the government approves the plan.

Some political parties and NGOs were up in arms after learning that the ministers and MPs would get hefty wage increases if the salary scale was passed by the Cabinet and Parliament.

There was deep division among ministers the issue, with some rejecting the hike in wages while others insisted that they were entitled to the increase like any other government employee.

But sources ruled out the possibility of the salary scale being endorsed in Parliament as many MPs fear that any such increase would cause the deficit to soar to alarming levels.

They added that the debate on the salary scale would continue indefinitely, suggesting that Prime Minister Najib Mikati would try to procrastinate and buy time until the next parliamentary elections are held in June 2013.

One of the options on the table is to borrow more money through the issuance of bonds to finance the salary scale, but even this proposal has not been finalized by the ministers.

However, the Economic Committees, a group that represents businessmen and private sector leaders, explicitly rejected any tax increase and warned against passing the salary scale at this critical time in Lebanon.

“Lebanon would face Greece’s fate if the new public sector salary scale is endorsed in Parliament,” said a senior member of the Committees, vowing to take escalatory steps if MPs pass the draft law adopted by Cabinet earlier this month.

“We are not against increasing salaries, but the new salary scale create a disastrous scenario for Lebanon. According to our estimates, [if the new scale is passed], we will wish that we were Greece,” head of the Chambers of Commerce Mohammad Choukeir said in reference to the Greek debt crisis.

Choukeir added that the committees would visit officials this week in a bid to lobby against the new salary scale.

“We will be visiting Lebanon’s three top officials to explain the consequences of the salary scale. We cannot [accept such a measure] because it presents a ‘deadly’ threat to the Lebanese economy,” Choukeir told the Central News Agency, declining to elaborate on the economic consequences “in order not to spread fear.”

Some analysts say the state budget would suffer a blow if the $1.6 billion-a-year scale was passed without securing equivalent funds from new taxes and fees.

There are also concerns over inflationary pressures caused by the hike.

“While all other countries have been cutting down on the salaries of MPs and ministers and reducing expenditures, [the Lebanese government] is increasing it. This is abnormal and illogical,” Choukeir added.

Choukeir said the Economic Committees would take escalatory steps if Parliament endorsed the new scale.

“But [I hope] they will not proceed with it. The government should have realized by now the consequences and Parliament will probably not pass it,” he said.

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