Ambassador Chatah Speaks at Al-Hewar Center
Former Lebanese Ambassador to the U.S. Dr. Mohamad B. Chatah urged to abolish income tax that impedes productivity in Lebanon and to replace it by a progressive sales tax. He also urged the public sector that is "unable to reform itself", to privatize its companies in the red. He said that the more the public sector is downsized the more the Lebanese economy will be well served.
Dr. Chatah gave examples of public companies in the red such as Lebanon Electricity with an annual loss of $150-200 million, Middle East Airlines $100 million and Lebanon Television tens of millions of dollars.
In his remarks at Al-Hewar Center on the evening of December 1, 1999, Dr. Chatah said that it is almost impossible to collect income tax from a big part of the well-to-do class in Lebanon that has its businesses tied to Riyadh, Saudi Arabia; Dubai, the United Arab Emirates; Paris, France; and New York, N.Y., because the biggest part of its income is made outside Lebanon. He called for raising tariffs on imports that comprise 60% of local consumption, and imposing a progressive consumption tax that will target the rich and one million Lebanese residing abroad but visiting Lebanon annually, among whom 300,000 live in the Gulf. In addition, he proposed to raise taxes from 14-15% to 20% of the local economy’s as is the case in some European countries.
Dr. Chatah thought that the partial residence of the Lebanese private sector's people, companies and businesses outside Lebanon made Lebanon much more global than many other countries. He noted that GDP growth slowed down in 1997, became very limited in 1998 and turned 1-3% negative in 1999. He pointed out that the public sector poses a "heavy burden" on the Lebanese economy as government deficit reached 14% of GDP. To cover this deficit, the government resorts to an annual borrowing over a huge debt of 130% of GDP.
Dr. Chatah partly blamed economic recession on a "wrong" decision in the first half of the nineties taken by private sector developers to invest $6-7 billion in building 70,000 housing units priced each at an average of $300,000-700,000 without taking into consideration much more humble demand possibilities in the Lebanese real estate market. Most of these houses stay empty. He pointed out that reconstruction in the early nineties scored at least a "limited success" in reestablishing security, bringing back constitutional institutions, rebuilding the infrastructure and making the Lebanese economy a part of the new global economy through modernizing Lebanese laws, establishing supervisory bodies and modifying existing supervisory instruments as well as providing investment tools.
Dr. Chatah underscored that rebuilding projects only consumed 15-20% of public expenditures, but the rest covered governmental expenses of which 95% were salaries for the army, security forces and teachers in a proportion of one to every 7 students. Per capita income went up from $900 in 1991 to $4,000 in 1997. During the same period, loans from Lebanese banks to the private sector increased from $1 billion to $14 billion. One million families in Lebanon own 1,100,000 private cars, and 550,000 cellular phones.
This report was prepared by U.S. Report on the Middle East, an online newspaper found at http://www.usrom.com
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