The Ministry of Finance issued, and later retracted, a statement about taxes for salaries denominated in US dollars. They will be paid after converting the salary to Lebanese pounds (LBP) using the central bank’s Sayrafa exchange rate platform—currently 30,300 LBP to the dollar— instead of the much lower official rate of 1,515 LBP.

LIMS explained that the tax brackets were modified in the 2022 budget, but not sufficiently enough to keep up with the LBP’s devaluation. The devalued exchange rate used to convert the salaries from LBP to US dollars will put taxpayers at a higher tax bracket without any actual increase in their income. Those higher implicit taxes will burden the already struggling residents and lead to a hike in tax evasion. Consequently, this will only motivate skilled workers to seek alternatives abroad. The same applies for tax exemptions and refunds. For example, the 7.5 million LBP exemption was worth $5,000 prior to the crisis. Yet now, the updated 37.5 million LBP exemption is worth around $1,200 at the Sayrafa rate.

LIMS argued for tax reform rather than tax increases. A much more efficient and less burdening system would be to repeal the progressive income tax and replace it with a flat rate. This reform would make tax evasion less desirable and allow skilled workers to keep a larger portion of their income, in turn helping retain talented workers within the country. Higher taxes will only delay recovery, deepen poverty, and further the economic collapse. Poverty rates have exceeded 80% and the currency has lost more than 95% on its value since the beginning of the crisis. Consequently, families have been struggling to keep food on the table. 

LIMS Media Interviews:

• Lebanon…A Fragile Economy Reflects Chaos In The Street, November 29, 2022: Ronahi, Article AR
• Following The Decision Of The Minister Of Finance…How Much Will Payroll Taxes Be Worth? November 30, 2022: Beirut24, TV Interview AR