First Published: 2017-08-21

Lebanese president ratifies public sector wage rise, tax hike
Aoun signs off laws increasing wages of public sector workers while raising VAT, corporation tax in face of criticism from those calling for ‘in-depth reformation’ before income redistribution.
Middle East Online

BEIRUT - Lebanese President Michel Aoun signed off on public sector wage increases and related tax hikes on Monday, a move that has triggered business concern but could help politicians shore up support ahead of parliamentary elections next year.

Aoun held off ratifying the two laws since parliament approved them last month amid objections from the business community about the economic impact of more taxes on Lebanon's fragile economy.

Finance Minister Ali Hassan Khalil, a proponent of the laws, said the move would "reflect positively on social stability". He said it would cost an estimated 1.38 trillion Lebanese pounds ($920 million), while the tax increases would bring in revenue of 1.65 trillion pounds ($1.1 billion).

But Nassib Ghobril, chief economist at Lebanon's Byblos Bank, said it was difficult to gauge how much it would cost because "we don't know how many employees there are in the public sector".

"It's difficult to put a real, credible figure on the cost of the public sector salary scale," he said.

The public sector pay scale law has been under discussion for years.

Ghobril said the public sector needed "fundamental and in-depth reforms" before salary increases. Without that, the new legislation amounted to a major "redistribution of income ... to a bloated, inefficient and largely unproductive sector".

The tax law raises value-added tax (VAT) by one percentage point to 11 percent and hikes corporation tax to 17 percent from 15 percent.

While increased public sector pay will prove popular among state workers, the proposed tax increases triggered several protests earlier this year. Some public sector workers had also demonstrated in recent days calling on Aoun to sign the laws.

Many economists say Lebanon should focus more on fighting tax evasion rather than raising new taxes to finance public sector pay increases.

Ghobril said that after years of deliberation, politicians probably passed the laws now "because we're coming close to parliamentary elections".

Lebanon is expected to hold long-delayed elections in May 2018, after the cabinet approved a new vote law that prevented a major political crisis. Lawmakers have extended their own mandate twice since being elected in 2009 for what was meant to be a four-year term.

The new legislation will take effect once it is published in the government's official gazette. Aoun had chaired a meeting of public and private sector figures last week to discuss the points of contention in both laws.

Aoun's election last year ended a 29-month presidential vacuum in a country that had been crippled by political gridlock for years.

Sunni leader Saad al-Hariri became premier in a power-sharing deal that saw Aoun, a staunch Hezbollah ally, elected president. Saudi-allied Hariri then formed a unity cabinet that includes nearly all of Lebanon's main parties.

 

Baghdad refuses talks with Kurdistan about referendum results

Three Israelis killed at West Bank settlement

Seven arrested in Egypt for raising rainbow flag at concert

European ambassadors to US strongly back Iran nuclear pact

Dubai set to become first city with flying taxis

Germany’s de facto ‘IS leader’ on trial

Saudi official axed over king's image with Yoda

Erdogan expects ‘ethnic war’ after Iraqi Kurdish independence vote

Syrian government ready to discuss Kurdish autonomy

63-year-old American abducted in Yemen's Sanaa

US kills ISIS chiefs hiding in new nerve centre

Saudi establishment spreading Shiite hate speech

Madrid hails Rabat’s collaboration in fighting terrorism

Regional tensions rise in Kurds’ independence vote

Iraq Kurds start voting in historic independence referendum

UAE announces plans for region’s first nuclear reactor

Erdogan threatens Iraqi Kurds with border closure, oil block

Putin to visit Erdogan this week for Syria, Iraq talks

Sudan vows to step up efforts to improve US ties

Turkey to launch intervention into Syria — and maybe into Iraq

Egyptian ‘world’s heaviest woman’ dies in Abu Dhabi

Palestinian unity government remains unlikely

Emirati man fights his employer to serve in country’s army

Palestinian PM to visit Gaza next week

Saudi advisory body to tackle female driving ban

Turkey denies closing Iraqi border in response to Kurdish vote

US air strikes kill 17 Islamic State militants in Libya

US-led strikes killed 84 civilians near Syria's Raqa

Yemen's Hadi says military solution 'most likely'

The high cost of Syria’s destruction

Palestinian negotiator awaits lung transplant in US

Kurds ready for contentious vote in Iraq

A Kurdish state: Reality or utopia?

Saudi intercepts missile fired from Yemen

Saudi Arabia marks national day with fireworks, concerts

Iran defies US, tests missile

Turkey warns of 'security' steps in response to Iraqi Kurd vote

Barzani delays Kurdish independence vote announcement

Syria's war off the radar at UN assembly

For many Iraqis, tradition trumps police

Darfur clashes kill 3 as Bashir urges reconciliation

Saudi cleric banned for saying women have ‘quarter’ brain

Veteran Syrian activist, daughter assassinated in Istanbul

Tunisia drops forced anal exams for homosexuality

Bomb used in Saudi-led strike on Yemen children US-made