Lebanese tax-raising law voided

beirut — Lebanon’s constitutional council decided on Friday to annul a tax law that was passed by parliament to finance a $917 million public sector pay rise, a package that had attracted concern from economists.

The law included increases in value-added tax, corporate income tax, taxes on tobacco products, lottery prizes and interest on bank deposits, as well as increases in fees and fines.

The council unanimously decided to refer the law back to parliament because it had not been passed as part of the annual budget process, it said in a statement.

“It should have come in the framework of the annual budget according to the principles stipulated in the constitution,” the statement said.

Lebanon has a debt-to-GDP ratio of 148 per cent, one of the highest in the world, and recorded a fiscal deficit of $4.9 billion last year. Moody’s ratings agency downgraded Lebanese sovereign debt in August citing its debt burden, but both S&P and Fitch affirmed their existing ratings. President Michel Aoun signed off on both the public sector pay rise and the tax hikes last month.

Finance Minister Ali Hassan Khalil called for an urgent cabinet meeting “to discuss the decision annulling the tax law and its consequences and to take responsibility with regards to the [public sector pay rise] law, and to find the necessary alternatives”, the National News Agency reported. — Reuters