Asked how the Cabinet will tackle the series of proposed taxes to finance the public sector’s salary increases which have sparked wide condemnation from ministers, banks, private businesses, economists and labor unions and put the entire fiscal plan in jeopardy, Khalil said: “I am holding consultations with the bankers’ association with the aim of reaching a solution to the problem of proposed taxes. Finding a solution to the proposed taxes is not difficult.”
Khalil, who has estimated the cost of financing the salary scale bill at LL1.2 trillion ($800 million), insisted that the taxes proposed in the draft budget would not affect the low- and middle-income people.
Prime Minister Saad Hariri has scheduled three Cabinet sessions for next week – Monday, Wednesday and Friday – to wrap up discussions on the draft budget. The Cabinet has held several sessions in the past two weeks devoted mainly to discussing legal provisions related to the budget, as well as tax measures and proposed amendments.
“We hope the draft budget will be endorsed by the Cabinet next week and referred to Parliament for a final ratification,” Khalil said.
The minister has proposed a series of taxes in the draft budget. These include raising the value added tax from 10 to 11 percent, increasing taxes on the interest of bank deposits from 5 to 7 percent, increasing taxes on companies’ profits from 15 to 17 percent, putting a 15 percent tax on profits from real estate transactions and implementing a 4 percent fee on the importation of kerosene.
Business leaders have warned that the proposed taxes would deal a blow to the already-struggling economy, burdened by more than $74 billion in public debt. As an alternative to the proposed taxes, politicians, labor unions and bankers have called on the Cabinet to put an end to the squandering of public funds, which is widespread in government departments, and to improve tax collection. President Michel Aoun, Hariri and ministers have underlined the importance of Lebanon sending a positive signal to international markets through the passage of a budget for the first time in 12 years.
Lebanon has been without an official budget since 2005 due to political wrangling between the rival factions.
The approval of the 2017 draft budget is seen as crucial for controlling state finances and improving the battered economy, as Lebanon has not ratified a state budget since 2005, leading to extrabudgetary spending in the millions of dollars.
However, differences within the Cabinet and in Parliament over financing the salary hike bill and demands by key blocs, mainly Aoun’s parliamentary Change and Reform bloc, for the auditing of $11 billion in extrabudgetary spending by former Prime Minister Fouad Siniora’s government between 2005 and 2009, might hinder the ratification of the draft budget in Parliament.
The Cabinet discussions on the draft budget come amid threats by civil servants and public and private school teachers to escalate their street protests if the government did not approve the salary increase bill next week.
Khalil said the Cabinet approval of the budget would allow political adversaries to concentrate their efforts on exploring a new voting system to replace the controversial 1960 majoritarian law.
“Consultations among the main parties to reach an agreement on a new electoral law are being held outside the Cabinet,” said Khalil, who has been meeting with Foreign Minister Gebran Bassil, the leader of the Free Patriotic Movement, and Nader Hariri, chief of Hariri’s staff, for talks on a new voting system.
MP Alain Aoun from the FPM said the president might announce steps next week to break the deadlock over a new vote law to govern parliamentary elections slated for May 21. He did not say what these steps are.
But an official source at Baabda Palace said that the president might invite leaders of parliamentary blocs for talks on a new electoral law at the presidential palace.
“Although President Aoun has proposed proportionality as the best electoral law, he is ready to accept any agreement that might be reached by the rival factions on any law except the 1960 law,” the source told The Daily Star.
Days after Hariri and Interior Minister Nouhad Machnouk signed a decree calling on voters to participate in the May 21 elections, three months ahead in line with current law, a hybrid vote proposal that blends provisions of the proportional and majoritarian systems appeared to be gaining momentum as an alternative to the 1960 law.
“Although there is no progress toward an agreement on a new electoral law, a hybrid law formula is the most appropriate today for all the parties that are looking for a law that takes their interests and concerns into account,” Future Movement MP Atef Majdalani told the Voice of Lebanon (93.3) radio station.
He reiterated the Future Movement’s opposition to the 1960 law and full proportionality as proposed by Hezbollah and the Amal Movement.
Speaking to the same radio station, MP Nabil Nicolas from the FPM said: “A hybrid law has the best chance, although discussions remain on details, especially there are some [politicians] who are trying to impose a law through which to gain the largest number of MPs.”
For his part, Maronite Patriarch Beshara Rai demanded a new electoral law that “guarantees to the citizen the value of his vote so that he can hold his deputies accountable.”
“We want a comprehensive and just [vote] law that enables Lebanese components to run in the elections and reach Parliament,” Rai told reporters after meeting Aoun at Baabda Palace.
Lebanese parties are sharply divided over adopting a proportional electoral law or a hybrid law that includes aspects of the proportional and the 1960 winner-take-all systems.
The FPM, the Amal Movement and Hezbollah have been lobbying for a proportional electoral law. The Future Movement and the Lebanese Forces have proposed a hybrid electoral law mixing aspects of the 1960 law and a proportional voting system. In a change of heart, MP Walid Jumblatt said in a TV interview during a visit to France this week that he supported a hybrid vote law.
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