In life and definitely in politics, things are not always as they seem. In Lebanon, fully cognizant of this conventional wisdom, “we rejoice in having something over which to rejoice”. Thus, did the government rejoice in its issuance of a tax that was named the Value-Added Tax (VAT) instead of calling it what it is: a sales or consumption tax. We pay 10% VAT in addition to customs fees on a new, imported car, for example, without asking what was “value-added” and by whom.

As a matter of fact, we pay approximately 12% on the import price (since customs fees are inclusive in the price, over and above which the VAT is added). However, we continue to call it 10% in Value-Added tax. This dichotomy is not coincidental, nor are the politicians of Lebanon naive enough not to see it. The fact is that all prime ministers and key politicians since 1993 have stated that the tax system in Lebanon is unfair and favors the rich. That is why a complicated term like the VAT (translated into arabic as qima al moudafa) can easily be passed, like a convoluted name for a medical product with a supposed magical cure. This is how we avoid talking about capital gains tax and progressive income tax and other tools that might help achieve more social parity, and then we throw in an issue like exclusive agencies to divert attention and fuel social feuds.

In spite of all that, the so-called VAT is a tax that should theoretically yield other added-value issues, since direct tax implies more transparency and hopefully, accountability. As for its impact on consumer spending and growth, 2003 will be the year for a proper assessment. However, and until the tax system is revamped, the “VAT” will continue to be a correct step on a faltering path.

Jawad Adra