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Lebanon's cabinet set to draft new tax law, devise wage hike solution

Sep 30

Lebanon's cabinet set to draft new tax law, devise wage hike solution

The Cabinet is set to draft a new tax law and take legal measures to resolve the wage hike crisis Friday, clearing the way for the payment of public sector employees’ salaries at the end of the month based on the new salary scale law. The move, to be finalized at an emergency Cabinet session to be chaired by Prime Minister Saad Hariri at 10 a.m. at the Grand Serail, is certain to defuse swelling street tensions and put an end to a five-day nationwide strike called by unions representing civil servants, workers and schoolteachers to pressure the government into implementing the salary scale law.

“Mabrouk [congratulations] to everyone. Salaries will be paid based on the [new salary] scale. Tomorrow, solutions [to be adopted by the Cabinet] will safeguard rights ... and financial stability,” Information Minister Melhem Riachi tweeted shortly after the end of a Cabinet session Thursday chaired by President Michel Aoun at Baabda Palace.

Despite the positive signs, labor unions and schoolteachers appeared to be unmoved, declaring in separate statements that they would go on with a general strike Friday unless their demands are met.

Amid the continuing strike that has paralyzed the country and closed public schools since Monday along with street protests over the government’s reluctance to implement the wage hike law, ministerial sources said there was no escape from paying public sector employees their salaries at the end of this month based on the new salary scale.

During its extraordinary session Friday, the Cabinet is expected to approve a new tax law to finance the salary increases that will take into account the Constitutional Council’s remarks on the tax hike law, as well as the clarifications of the council’s President Issam Sleiman, a ministerial source said told The Daily Star.

Among the topics discussed during the Cabinet meeting was an amendment of Article 87 in the Constitution that has been sidestepped because it requires a vote, in addition to an agreement among ministers not to raise this issue, the source said.

Article 87 stipulates that public accounts must be balanced before a new state budget can be endorsed. Parliament is supposed to approve the new tax law to be prepared by the Cabinet during its session Friday because the Cabinet’s components are represented in the legislature.

But if for some reasons the new tax law is not endorsed by lawmakers, Parliament would then have to pass a draft law to suspend the implementation of the salary scale law, the source said. The source added that Aoun settled the row over the release of the 2017 draft state budget in order to prevent the country from falling into a financial crisis and would facilitate an agreement in the Cabinet on the new tax law.

Aoun has pledged to sign the draft budget to be followed by a breakdown of extra-budgetary spending, estimated at millions of dollars in past years, within a specified period as a solution to avoid an amendment of Article 87 in the Constitution, the source said.

At the end of Thursday’s Cabinet meeting, Riachi said a decision would be made Friday on the implementation of the salary scale law.

“Following discussions, [Cabinet] unanimously decided to take legal measures to tackle the scale issue and the tax law. This will be accomplished at a session to be held at 10 a.m. tomorrow at the Grand Serail,” Riachi said. Asked if the Cabinet would send to Parliament a draft law separate from the tax hike law that has been annulled by the Constitutional Council, he said: “The atmosphere is very positive. You will hear tomorrow new legal measures.”

After briefing the Cabinet on his recent visits to New York to attend the U.N. General Assembly and France where held talks with French President Emmanuel Macron, Aoun reiterated his position on the need to ratify the state budget before the salary and tax hike laws.

“The Cabinet is called upon to discuss the new situation that emerged following the Constitutional Council’s decision and take the appropriate decision on it,” Aoun said.

For his part, Hariri spoke constructively about the salary scale law. “Since the beginning, there has been an agreement to go through with the salary scale ... with taxes to fund it,” he said.

Hariri said that in the wake of the Constitutional Council’s decision, there were two options: Either we include the taxes in the state budget and solve the problem of the audit of extra-budgetary spending, or agree on a new law containing taxes to fund the salary scale law.

“All signs in the past eight months indicate positive developments at the economic level and in tourism,” he said.

Local media reported ahead of the Cabinet session that views among ministers were still split over whether the salary scale law should be included in the 2017 budget or to implement it independently.

During the session, Aoun took the chance to brief Cabinet on figures released by international organizations dealing with Syrian refugees’ affairs.

According to the figures, an estimated 40-percent of prisoners in Lebanon are Syrian nationals, while since the start of the Syrian crisis Lebanon’s unemployment rate has risen to 30 percent.

Similarly, the Syrian refugee influx to Lebanon has led to a surge in unregistered births, according to a report by one of these organizations.

The report cited an increase in the smuggled Syrian goods to Lebanon as well as increased garbage as a result of a rising population and consumption.

According to the report, the number of Syrian refugees in Lebanon is the equivalent of 40 percent of the country’s estimated 4 million population, excluding the unregistered Syrian births.

An estimated 350,000 Syrians are working in the construction field, while 400,000 Syrians are working in agriculture, Aoun said the reports indicated. He added that 380 restaurants opened in the Bekaa region were owned by Syrians.

The president said the reports placed the estimated total financial cost of the Syrian refugee crisis on Lebanon’s public services, health and education at $650 million. The more than 1 million displaced Syrian nationals consume an estimated 680 megawatts of additional electricity.

It added that the country’s economic growth dropped by 9 percent, and foreign investments in Lebanon fell by around 45 percent.

zawya