Lebanese wary of rising customs duties amid economic crisis
BEIRUT – The Lebanese government on February 10 approved the finance bill for the year 2022, with plans to increase customs duties and impose new taxes. The budget will be discussed in parliament on February 21 for ratification. This comes as the Lebanese people grapple with their worst economic crisis in nearly two years now.
Recent discussions on changing the exchange rate of customs transactions for imports and imposing new customs duties have caused great concern among the Lebanese. The measure will further increase the prices of goods and services since Lebanon mainly depends on imports for all its needs.
Sasha Amin, a young Lebanese woman who works in public health, told Al-Monitor: “If the dollar exchange rate for customs is increased, the situation will get even worse and prices will skyrocket. Prices for medical care and basic needs, including food and education, are already skyrocketing. An increase in the rate of the customs dollar will be catastrophic.
In addition, many local factories depend on imported raw materials.
The customs dollar is the price used to calculate the customs value of imports and it is paid in Lebanese pounds. Its price was set according to the official exchange rate at 1,515 against the US dollar. Amid the free fall in the value of the local currency since October 2019 and the emergence of multiple dollar exchange rates, talk of changing the customs value exchange rate has been in the headlines.
Immediately after the approval of the state budget, Prime Minister Najib Mikati said in a statement that the customs dollar will be applied when the budget is ratified in parliament.
He noted that the customs transaction exchange rate for imports will be set by the central bank’s exchange platform, known as Sayrafa, and will be announced by the Minister of Finance on a monthly basis.
“Customs taxes on medicine and food, as well as coffee and tea, will be removed,” Mikati said.
Sayrafa is a new electronic platform developed by the central bank which aims to register all exchange transactions in the Lebanese pound in any other foreign currency, in order to fix the exchange rate according to a daily pricing close to the exchange rate of the parallel market currently in force. at 21,000 Lebanese pounds to the dollar (at the time of this writing).
Despite assurances from concerned authorities that the new customs dollar will not affect commodity prices, many citizens find it disastrous and believe that it will increase state revenue in the pockets of the people in order to reduce the deficit. public budget.
Meanwhile, the prices of some commodities have already risen on the pretext of covering the future cost of imports.
Ali Abbas, a lawyer and activist with the local People’s Anti-Corruption Observatory, told Al-Monitor: “Adjusting the price of the customs dollar and imposing a 3% fee on all imported goods and a 10% fee on goods imported if similar goods are produced inside Lebanon will definitely inflate the prices of all goods. Instead of implementing customs reform, [the government is making] the consumer bears all the burden.
Abbas argued that the new tariffs will not increase customs revenue but rather promote fraud, tax evasion and smuggling of goods across the border. “To improve customs revenue by 40 to 50%, the entire trade and import sector must be reformed. Despite endemic corruption, the sector brought in a third of state revenue.
In turn, economist Walid Abu Suleiman pointed out that citizens need to know which products, in particular, would be exempt from customs duties, as this has not yet been clarified.
Abu Suleiman told Al-Monitor: “There is no social justice in Lebanon. Depositors only receive a portion of their funds held in banks at a price of 8,000 Lebanese pounds to the dollar. Meanwhile, the Lebanese are forced to pay prices for goods and services at the exchange rate set by Sayrafa, which is much higher.
He added: “Any global tax would not bring significant revenue to the state. It would have been more useful to impose excise taxes affecting the wealthy classes – for example, on cars whose price exceeds $100,000, and on the occupation of maritime public property.
Mikati announced in the same statement after the approval of the budget that the budget foresees spending of 47 trillion Lebanese Pounds with a deficit of 17%, which is equivalent to approximately $330 million at the parallel market rate. He called the budget “the first step in a series of measures that will be taken on the financial level”, adding that a workshop focusing on the economic recovery plan will be held soon.
However, Abu Suleiman said the new budget lacks a clear fiscal policy or economic vision.
The unprecedented economic crises in a debt-ridden Lebanon have led to a record collapse in the value of the national currency against the dollar, a rise in the price of raw materials and a crisis of shortages of medicines and fuel.
The increase in the price of the customs dollar would inflate the prices of goods, reduce the purchasing power of the population and amplify the already rising poverty rates.
Meanwhile, Lebanon is applying for a $3-4 billion loan from the International Monetary Fund, which requires the implementation of the necessary comprehensive reforms in order to unlock donor funds.