Adonis Diaries

Posts Tagged ‘TVA rate

This Pseudo-State is bleeding its chattel dry (Lebanon)

I have expanded on the social/political structure of the pseudo-State of Lebanon in many articles, and this post means to go to the nitty-gritty of how the government gets richer and the chattel not receiving a dime in return. The only expenditure on infrastructure is on asphalt to cover a few roads at election times (see note 1).

The main theme of this post is to describe the Independent Municipality Fund in Lebanon, and I have to explain a few other economical and financial problems first in order to set the social environment straight.

In 2006, the government of Seniora PM instituted the TVA, a tax collected on every product or service the “citizen” purchase. The TVA rate was 10%, with the promise that product manufactured or produced internally will be exempt from TVA (that was the biggest joke ever)

It turned out that TVA was applied to every level of the trading  chain from importing to wholesalers to intermediate chains…to retailers.  Not only the government got richer from the successive TVA collected on the intermediate level, but the hapless “citizen”, whom I call chattel,ends up paying about 25% TVA rate!

Another example, the citizen has to pay TVA on gas, and the government collect TVA on the gas distributors too.  The gallon of gas for cars has increased in price three folds in the last 4 years to about $8 per gallon.

Mind you that the citizen has to pay twice for electricity: The bill of the government and the bill to the private providers. The government spends $2 billion to subsidize electricity because it intentionally refuses to upgrade and build new power plants…On the ground that:

1. Private providers are primarily owned by the sectarian militia leaders of the civil war and still running the country…

2. The government wants to privatize the power sector and doing what is needed to bust the already shaky power infrastructure…

And Lebanon, the only country that receive any rain in the Middle-East (800 mm), scarcely has potable water, even during the rainy season. And what the chattel do in the 7-month dry season? They pay for water trucks at the rate of $75 per transport, every two weeks…

Mind you that Lebanon governments never submitted a budget to the parliament since 1993, and is not about to agree on a budget even this year, or the next year.

And during all these years, $11 billion vanished into thin air, and no a piece of accounting record or paper scrap to show how all that money was spent on.

What of this Independent Municipality Fund in Lebanon?

A law was enacted in 1979 that has been changing almost every year since 1993 in order to figure out how to siphon the 11 kinds of taxes collected from municipalities and mismanage the money back into the pockets of the sectarian militia leaders of the civil war who are still running this pseudo-State.

For example, the theoretical detailed protocol for distributing the municipality Fund read as follows:

1. 75% of the Fund goes to the municipalities and 30% to the union of municipalities in every district.

2. Out of this portion supposedly re-distributed to the municipalities by the minister of finance, 70% goes to cover the running budget and 30% for development projects.

How the Fund reserved for the running budget of municipalities are supposed to be allocated?

1. 60% are allocated according to the number of “registered inhabitants” and Not based on the effective people residing in the municipality.

2. 40% are allocated based on the average taxes collected in the last two years.

There are 42 municipalities in Lebanon with actual residing people at least double the number of registered inhabitants. The total residing people is about 916,000, compared to 230,000 registered.

There are 324 municipalities witnessing the reverse trend: The total of registered is over one million, compared to 336,000 effective residents

Since taxes are mostly based on the “rental value” of properties, the towns oriented toward tourism receive far higher shares than the agricultural villages.

The evaluation of tax collected does not consider the improvement effected in the collect. Thus, municipalities have no incentives whatsoever for going the extra mile into improving the collect system and programs: The larger municipalities are biased in the share they receive, though they are the worst in efficiency in tax collection…

The main problem is that the successive pseudo-governments, particularly after 1993, have been changing the law for the allocation and distribution of the Independent Municipality Fund.

Worse, the money is to be distributed in September, but the municipalities had to wait years to get any fund, distributed on election periods.  

Obviously, no citizen expects any development from his municipality.  The obvious purpose is that the governments have been diverting the Fund into covering the government budget deficits, primarily spending (50%) of the “budget” on paying interests on the over $60 billion loans.

The latest two ministers of communication (cell phones…) decided to retain the money generated (and not deposit it with the finance minister) until a steady and reasonable protocol is agreed upon to redistributing the money to the Independent Municipality Fund 

Note 1:

Note 2: The part on the Independent Municipality Fund was inspired from a piece by Sami Attallah submitted to the daily Al Nahar




February 2023

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