Over the past few months, Lebanese policy makers have dealt with two important issues: the increase of public sector wages and the funding of the hike by increasing taxes. On August 21, Law no. 45 on tax and Law no. 46 on public salary increase were enacted and entered into force.
On August 30, a group of 10 MPs submitted a request to the Constitutional Council in order to cancel the Law n. 45 ab initio. The Council has suspended the law on August 31 to assess its constitutionality and gave a final decision last September 22.
The Constitutional Council unanimously issued the resolution N. 5/2017 abolishing Law N. 45, accepting the arguments put forward by the claimants and adding another line of reasoning:
- The law was approved without abiding by the legislative voting procedure (which should have been on a roll-call basis).
- the bill introduced double taxation of bank interests for liberal professions (one time deducted at the source and another time when calculating the taxable income).
- It was contrary to the non-assignment rule. The Lebanese Constitution contains a principle called مبدا الشيوع that prohibits to impose specific taxes and allocate the revenues to cover public expenses : عدم تخصيص واردات معينة لتغطية نفقات معينة.. Since Law No. 45 allocated the projected revenues of tax increase to the funding of the public sector salary hike, the non-assignment rule was contravened.
- Finally, the law was not approved in the framework of the preparation of the public budget. This is the argument not evoked by the plaintiffs but raised by many legal experts as a false interpretation of the Constitution.
It should be remarked that the tax increase was supposed to concern, among others, the VAT (+ 1%), the corporate income tax for stock companies from 15 to 17%, the taxes on interest (+2%), and sea shipping (per container), the stamp duty from 30 to 40, and the notary fees. Up to date, none of these increases applies.
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