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Taxation without representation

The budgetary process must be transparent

by Executive Editors

For 12 years running, Lebanon has been without a budget. This does not mean the state hasn’t been collecting revenue and spending it. Rather, it means there have been no clear-cut priorities, nor a strategic vision guiding how the government manages taxing and spending. During the past five years, the problem of finding revenue to finance raising public sector wages has been the only issue discussed in the budget “debate.” While it’s fiscally prudent to consider how to offset increased spending with increased revenue, a laser-focus on this one issue is myopic, and gets us no closer to a sound fiscal policy that would benefit the wider economy.

The fact that three separate governments have spent five years mulling how to raise taxes suggests our lawmakers’ fiscal policy is limited to ensuring minimal government spending needs are met. The state’s continued failure to provide basic, uninterrupted services proves we do not have a fiscal policy focused on meeting the people’s needs. First and foremost, this must change. It won’t be an easy change, but there are a few clear actions that can be taken immediately.

In parallel with imposing new taxes, the state must begin the full collection of taxes already on the books. The International Monetary Fund estimates Lebanon only receives around 50 percent of the revenue from existing taxes. This won’t change overnight, but addressing the shortfall should be an immediate priority. Because talk of state finances is conducted behind closed doors, it is difficult to offer precise recommendations on how to improve tax collection, but global best practice can certainly guide us. Studies of the US economy suggest every $1 invested into the country’s tax authority brings in $4 (possibly more) in tax revenue. A strategic lift on the civil servant hiring freeze would be a good first step toward better collection.

Along with improving collection comes the need to reduce waste. The Ministry of Finance is nearly finished closing state accounts from the past 20 years (i.e., tallying Lira by Lira where state money went, to the extent possible from available documentation). In a 2015 interview, the ministry’s director general told Executive that “anomalies” were found. What this means is that money went missing, and is presumed to have been stolen. Everyone in this country knows corruption is a serious problem. Provided Parliament makes the details of the finalized accounts public, we’re close to a roadmap detailing how much revenue has been lost in the past two decades and from where it disappeared. It is perhaps too much to expect the state to be paid back, but the exercise surely must have provided clear indications of how future theft can be prevented. If the government’s objective in drafting a budget is simply to meet its spending needs, than those of us paying for it must be confident we’re not being swindled.

Building that confidence requires more detailed and public budget discussions. We demand a budget that prioritizes stimulation of the economy and improves the internal distribution of wealth. Options for how to achieve these goals are myriad and should be chosen based on robust national discussion, not dictated by the Minister of Finance, Parliament or cabinet after closed-door meetings. Passing a budget that actually benefits the country and its people, instead of imposing new taxes to meet an immediate need and preserve the status quo, demands careful calibration and communication. Our budget debates must be public, detailed and forward-looking. Civil servants certainly deserve a raise, but the nation also deserves a fair and strategic fiscal policy.

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Executive Editors

Executive Editors represents the voice of the magazine.

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