Stalled progress

Whatever taxes come next must be transparent

Public workers were protesting at the end of September out of fear the government might not honor legislation ordering an increase to their salaries and benefits. The protesters feared that the government might suspend the salary increase because the revenue it expected to cover the new spending was struck down by a court ruling. The Constitutional Council, Lebanon’s highest constitutional authority, annulled a tax law passed in August by Parliament that would have brought in revenue to cover the deficit expected from the salary increase. If the Lebanese government and Parliament had just passed a budget, which it has unconstitutionally failed to do since 2005, then we would not be in this mess.

The Constitutional Council ruled in favor of an appeal, brought forward by 10 MPs that argued the tax law violated Lebanon’s constitution. In its ruling decision—that cannot be challenged—the court said it annulled the tax law for several reasons:

(1) The vote violated Parliament’s voting rules—they should have called a roll call vote, but instead, the vote was tallied by a raise of hands;

(2) The tax law violated Article 83 of the constitution because new revenues and expenditures must be included in the budget for the next fiscal year and violated Article 87 of the constitution that says the government must close its financial accounts at the end of each fiscal year with parliamentary approval;

(3) The ruling also took issue with Articles 11 and 17 of the law. The former concerned the taxation of illegal coastal properties, which the court ruled contradicted the constitution because the tax was not clearly defined. The latter raised the tax on the interests on deposits, which the court ruled violated the principle of equality vis-a-vis the tax burden.

On the court’s first point, it is surprising that Parliament—whose Speaker has held the position for 25 years, and whose members, thanks to twice extending their own terms, have served for at least eight years—cannot properly vote on a law.

On the second point, in March the Cabinet approved the budget for 2017 and referred it to Parliament, which has yet to vote on it. Still, the 2017 process was an improvement on the 11 previous years, in which Lebanon went entirely without a state budget—for reasons that are quite beyond rational explanation. The closure of public accounts was an impediment, but according to Alain Bifani, director general of the Ministry of Finance, public accounts have been reconciled back to 1997. The government should now be finalizing the 2018 budget and sending it over to Parliament to vote on.

On the third point, the court’s remarks on Article 11 and 17 of the tax law are being addressed by the government, according to a Ministry of Finance statement, without elaboration. Local reports tell of an expedited tax law, which is unlikely considering the court has just ruled that taxes cannot be legislated in the absence of a state budget. Hopefully, the ministry’s statement was referring to amendments to those articles that will be included in the budget, but at time of publication the government’s intention was not clear.

After the court issued its decision, some officials attacked the court’s ruling, arguing it infringed on Parliament’s right to legislate the new taxes, while other officials called for suspending Article 87 of the constitution. “If they’re cornered, let them search for a solution to the problem that they’ve created instead of attacking the Constitutional Council’s decision,” president of the court, Judge Issam Sleiman, said in a statement to local media. The “solution [is] approving the state budget and the necessary auditing because their absence for more than 10 years opens the door for the waste of public money and the spread of corruption across all the junctions of the state,” he added.

Unless somebody challenges a law in front of the Constitutional Council—which requires 10 MPs’ signatures­—the court will not review a law on its own initiative. If that is the case, which it seems to be, the Constitutional Council was acting as a safeguard, not an initiator. The question then is, if Parliament retooled the tax measures, would they be challenged again, or would the measures be safe if added to the budget? At the end of September, as Executive went to print, it was not yet clear what, if any, alternative would be pursued.

What this publication demands is a return to budgetary discipline and an orderly budgetary process in cabinet and in Parliament. Parliament should debate a budget’s merits transparently, not keep it hidden from the people.

On the question of tax fairness, because it seems the issue was at least a part of the appeal to, and ruling of, the court, at this point it is difficult to say which taxes would be fair, or which would be adequate. The debate was not transparent—the public did not know for sure which taxes would be levied until they were published as law in the Official Gazette. Executive cannot issue any recommendation on which taxes were good or detrimental because no statistical data has been disclosed that would allow the Lebanese sovereign—the people—to evaluate such taxes. The Ministry of Finance said they ran simulations, but those were not made public before, during, or after the taxes were ratified. Elected and public officials must eliminate partisan politics as much as possible from the tax debate by elucidating the statistical base that is available. If the tax law will be amended, or if the revenue measures are to be included in next year’s budget, then due process, proper procedure, transparency, and study of the implications—rather than gamesmanship or distorted claims—must be followed.

One Comment;

  1. Andre Zanon said:

    I’m glad to hear that there are honest politicians working for the people, it really is not fair to buy taxes / taxes irregularly.

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