By Ghassan Karam, Special to Ya Libnan
It has often been said that the clearest image of the values and mores of a country can best be seen in the way that it treats its poor. What better time of the year to take a look at the level of poverty, income distribution and the resultant inequality than on the eve of a new year and a new decade for that.
No one likes to pay taxes and especially so if you are a wealthy Lebanese. The sum of all taxes collected by the Lebanese government , excluding customs duties, are estimated to amount to less than 15% of the GDP which is quite low for a country at this stage of development. Even this low level of taxation would be 50% lower had it not been for VAT, essentially a regressive tax. The other major source of revenue for the government is customs duties which amount to 20% of its revenues or about 6% of the GDP and must decline if Lebanon is to join the WTO. So where is the revenue from the progressive personal income tax as well as the corporate income tax? Unfortunately they only amount; in the aggregate; to a sum that is essentially equal to what is collected from VAT and that is a shame. And that is a shame. Total taxes paid by all business entities in addition to the income taxes paid by all wage earners in Lebanon are only equal to what is collected from a sales tax. It does appear that the burden of taxation is exactly the reverse of what it should be.
Like most developing countries Lebanon does not have a good reliable record of macroeconomic data that could be used to develop meaningful policies to target the most pressing economic problems such as poverty and inequality. Yet, there is a recent study about poverty in Lebanon which was released during the month of January of 2008. This study done by the UNDP highlighted the plight of many Lebanese and the need to implement post haste an anti poverty program across the country. The following is a summary of the major findings:
(a) 28% of the Lebanese are poor and 8% are in extreme poverty.
(b) Extreme poverty is measured as $2.4 per day i.e. under $900 per annum per person.
(c) 20 % of the Lebanese live in between the poverty lines.
(d) Both extreme poverty and even total poverty are rather evenly distributed.
(e) The Gini coefficient ; a measure of economic equality; was estimated to be around 0.37 which is the average Gini for MENA (Middle East & North Africa )
(f) All Lebanese could be lifted out of extreme poverty at the relatively small cost of $12 per Lebanese per annum; less than $50 million.
(g) The top 20% of the Lebanese consume over 6 times what the bottom 20% consumes. (43% vs. 7%)
(h) Regionally the residents of the North were the poorest followed by the South, Bekaa, Mount Lebanon and then Beirut.
(i) The median per capita annual level of consumption for the year 2004-5 was estimated to be $2067.
Fast forward to the New Year celebration planned to take place on New Years Eve 2009 at Solidere in Beirut. The price of admission to have a seat by the dancing floor, a 3 course dinner and an open bar will set one back by $5500.00. (Yes the price of joining the festivities is five thousand five hundred dollars in case you thought that was a misprint). Now go back and take a look at item (i) in the list above and cry.
Yes I know, we live in a free market economy and individuals should have the right to spend their wealth any way they choose. That is true provided they recognize that their wealth was not generated in a vacuum and that they have a moral obligation and an ethical responsibility to carry their fair share of the costs of running the society that they are members of. That means that they should act responsibly by shouldering more than a token income tax while the majority of government revenues are collected through a regressive taxing structure. It means that it is decadent and totally irresponsible when a country whose level of welfare is dependent on grants and gifts from the Saudis, French, Norwegians, Americans, Russians; just to name a few of the donor countries; is capable of throwing such expensive private New Year celebrations for the pure hedonistic pleasure of the few. The privileged reap most of the benefits from the government expenditures while the poor carry the national debt burden. This is pure debauchery.
The above can be heard as a Podcast at: ramblings11.mypodcast.com
(This post would not have been written had it not been for the suggestion by Sebouh, a regular reader of this space. Thanks Sebouh)
Well this is Lebanon, a country where celebrations and large parties are common… I heard the majority of these 28% are recognized Palestinians, Kurds/Syrians, Iraqis etc. so basically foreigners. Yes this is sad, yet not so much a major issue comparing Lebanon to other countries.
Louay,
The point is not whether people like to party or not, it is about income distribution, poverty and the thrust of the growth policies in addition to the seemingly unjust taxing system. If we see nothing wrong with our love for extravagant parties then maybe we should stop going around the world begging for any and all donations. I don’t see the need for the already overtaxed French citizen to subsidize the extravagant of an ungrateful and an irresponsible Lebanese.
As for your arithmetic it sure is fuzzy. So all the Palestinian in the camps are counted among the poor. That is onlt 250,000 poeple so how would you account for the other 800,000 individuals? And since when does a country measure the level of poverty of its residents by choosing not to acount 5% of the population who have been living there for over sixty years? I have to give you credit though, you can solve any problem by redefining it? Unemployment in Lebanon? What unemployment, just repatriate the Palestinians, Kurds, Syrians, Somalis and Lebanon will become fully employed or better yet prevent the women from seeking employment.
Louay, I am certain this was not your intention but don’t just jump blindly to justify a sick and rotten status quo.
I posted a link to your story on my Facebook and i wanted to share these comments with you Ghassan. This is a perspective of 3 foreigners which are well aware of Lebanon and it’s society and system and structure and they are close to me ( a Lebanese citizen living abroad)
Unfortunately, the debate is high and this is not the first time since i have moved out to an EU country that i understand more and more your point of view Ghassan. People in Lebanon might think that we expats come in an attitude of arrogance and supremacy which is not always the case but we Lebanese do not like to be taught or learn or be seen in any negative way. We are the Phoenicians after all!
Read below the comments made.
Ma***
So Lebanese dont have $12 per year for taxes?? So greedy?
And, by the way, I pay annually much more tax money TO LEBANON because our country is one of the donating countries. And I cant even think of paying that much to a party. Very fair, eh?
Sa****
Unbelievable and sad. But can you really do much with 50M? I mean if there are ~350k extremely poor people in Lebanon it would make ~140$ per person per annum (less than 0,4$ per day). Well, I guess it would be a good start at least.
This was a good reminder for me to take that UNICEF “bill” under the pile…
An****
At least those who attend to the party are paying themselves. In many other poor countries the party bill would be paid by taxpayers or donors. I also guess that many of these rich people will come from outside Lebanon and spend some of their money there, including in services provided by those who work in the lowest-paid jobs like Syrian parking-… See Morespot caretakers and Ethiopian toilet cleaners. No, of course it’s not an egalitarian society, and it has big governance problems (which should put it in question whether taxing is the right solution), but if it didn’t provide better opportunities, so many guest workers wouldn’t wish to come there to work.
“Lifting someone from poverty” is actually not as simple as collecting that much tax from the other Lebanese. What do you expect? The government to hand that money over to the statistical extreme poor? “Here’s some cash for you, now you’re no longer extreme poor.” This is not how any government uses its tax revenue, I must say. But it’s easy to play with statistics when one wants to make a critical point, yet without a proposal on how to solve that.
M**** since when did you start paying taxes to Lebanon? I am absolutely sure that your personal share of the Finnish donations to Lebanon does not reach 5500 $ and not even the 12 $. Most of the taxes you pay are used to run the Finnish public social and health sector, for example to the salaries of many people who earn more than you. I think education sector came second, but I don’t remember exactly.
Ghassan, you seem to have quick answers. Just to state again, I HEARD about this. It is more commonly known anyway that Shiaas are among the poorest out of the Lebanese. And btw, did you mean ALL the Palestinians are 250,000, or are you talking about recognized Palestinians?
Overall, seeming as we have a progressing government, I find it better to think and believe that they can sort out these problems, because I don’t really enjoy reading thru these kind of articles… and when I said parties and celebrations are common in Lebanon, I meant it in a more factful and humurous manner.
Sasi,
Thank you for adding a link of this post to your Facebook
k. I am glad that you did since the whole idea behind such posts is to promote responsible discourse.
Ma****/M****
Lebanon is constantly asking for aid and grants. The firefighting helicopters were donated, the army helicopters were donated, the police cars were donated, the army ammunition is donated etc… but yet we can throw some of the most extravagant parties in the world and find a way not to pay taxes. Why pay when others are willing to pay for you?:-)
An***
Poverty is not measure only in monetary terms but if one is to confine oneself to the monetary issue then it is clear that Lebanon could easily help the UN reach its MDG of halving extreme poverty by 2015. It does not take much besides the political will that is not present. Giving money to individuals will not solve the problem since as you know ” Give a person a fish and you have fend him/her for one day teach them to fish and you have fed them forever. The government has not undertaken any projects in any field to decrease poverty. All the Lebanese National Debt has been primarily earmarked for fancy projects that benefit the well to do. And that is the rub. If we continue on this road then what is currently a small investment to deal with the issue would become a huge one. Lebanon managed to decrease its poverty rate between 1950 and 1970 but then our misguided policies after the war have taken us back to where we were in the 1950s. This is NOT an endorsement of the 60’s and 70’s but is a factual statenent that unless poverty is checked then we have no one to blame but ourselves if whatever is left of the social cohesion falls apart.
Tank you again for linking the post, for writing and for sharing your readers’ comments.
Louay,
You still don’t get it do you? You can classify and reclassify the residents in Lebanon any which way you choose. It will still show that almost 1 in 3 is poor and one in 12 is extremely poor. And by the way, the last time I checked YaLibnan was not a gossip column , at least not yet. So please deal with facts and do not justify positions by saying I heard. So what? Did you do any research? have you read any reports that claim that poverty is only a figment of the imagination since many of them are not
‘Recognized” LOL.
So you already new that the Shia’a are amongst the poorest, good for you. Did you know that the Northerners were the poorest and that Nabatieh is less poor than the North , the rest of the South and the Bekaa? Did you know that poverty in Lebanon has become much worse as the national debt kept on growing? Did you know that poverty in Mount Lebanon as well as the North has been on the rise? Do you care that most of the well to do do not pay their fair share of taxes? Do you understand what is the significance of a regressive tax?
Happy New Year.
To Ghassan. I know for sure YaLibnan was very steryoetypical and had great oppositions about things it didn’t even understand of, and no I didn’t actually know the North was poorer than the South, and that IS a major issue, but you know why, because I don’t give a damn about researching such things, however DO care about the fact that !! 1:3 !! are poor. The debt is a major issue which has to be solved asap yes, but what I actually meant oh sensitive Ghassan, is that we are not as bad if comparing us to other nations, might not be relative to say, but lets just mention it anyway. And yes, I think it is relative to mention ‘RECOGNIZED’ and ‘UNRECOGNIZED’ Palestinians, seeming as they do make up part of the approx. 4 million people. Reply soon Ghassan.. Happy New Ye/
To Ghassan and Louay what matters is the welfare of the people in Lebanon regardless of their religion race, or ethnicity. The poor needs to be recognised and helped in order to improve their living conditions and ensure bettter future for all children living whithin our borders. Please do not argue but unite and act according to your goodwill and best intentions in building a better Lebanon for all always . thanx guys.
Ghassan is the author of this article and i guess he did his fair research on the subject before posting his story. We better show him some respect in the way we communicate.
I know Louay that you are simply defending the positive mentality of some of the Lebanese that hangout in Gemmayzeh and Downtown and ABC and Hamra and other places alike which show a great image of the modern Lebanon, but have you ever though Louay that 3 km from each of these destinations lies poverty extreme poverty if you count areas like Nabaa or Sabra and Chatila lives extreme poor people in inhuman conditions. And when i mean extreme, i mean people without rights or without descent life standards or anything. not even power or jobs or a basics of human rights to work and live.
You know, it wouldn’t be hard to make from Lebanon a stable country, modern, advanced if there was a will but I have learned a great shame about us Lebanese, we blame the whole world before blaming ourselves. We always look for somebody else to blame and we always look for the big PLOT. We never listen or learn, and our arrogance and supremacy rises above all, as a proof is that the best and well off can be in the 5500 USD parties where others can barely eat some bread.
A society is build from common responsibility and social education, and sharing taxes. I will show you a small concept from where i live today:
I live in Finland, if i make 2500 euro/month , i pay estimate 20-30 % of it for taxes.
Taxes will offer me: – free hospitals – good roads -24hours power supply and water and heating even in minus 20C – fast Internet connection and good infrastructure – legal rights and human rights – protection from theft and the government is the only one defending the country – freedom of speech and i can choose my religion (all these with 20% taxes money)and much more like public transport in all major cities in a country much bigger in size then Lebanon.
Is it hard for 4 million citizen to do the same? since 5.5 million are able to do it?
I know you will tell me Lebanon had wars and etc .. YES! but Lebanon does not want to evolve since our leaders in powers have their self interests which war and instability is in their interests,and we do not have the dignity to stop corruption and start thinking of everybody else in our country. we are selfish in nature i guess! Maybe its those Phoenicians genes we claim to have
but Thanks god we have Haifa wehbe to brag about for our Arab tourists.
Happy New Year to you too all and may it bring some wisdom in the mind of the Lebanese maybe it awake them of the fact that there is somebody else then ME and ME ONLY out there!
Dalal, I am not dividing between religions I’m just making a point… and Sasi, good point you did make, and surely if Lebanon was like that I wouldn’t imagine anyone having any reason or excuse to leave (but they always say it for the jobs only)… We all pray to God, though it is not entirely his responsibility
, to put some sense into these politicians, and let them start doing what they say… We want better roads, better health and educational services, 24hr water and energy supply, more jobs and higher wages etc. Does this gvmnt want it too? Lets hope so.
Every decent Lebanese wants a social change and a fair go for everybody but how is this possible with a corrupt government and disfunctional system that contributed to drowning this small country into a bloody civil war. and how is this possible with men in power who have blood on their hands still exist as our representatives today. Power of the people would bring such stable economic change but unfortunately we are good talkers blamers and laisez-faire individuals…someone else will fix it no probs….the rich get richer and the poor just pass the rich and envy them..oh well nothing has changed since 1970s..keep life simple and go with the flow.
Glad to see we are at least discussing such an important subject. Income tax is important in that it instills civic duty and hopefully teaches respect of the rule of law. VAT I feel is an unfair tax on the lower paid because it takes away a larger share of their income. What about other forms of taxation that the Lebanese government can collect? For instance inheritance tax, capital gains tax or tax duty on the sale of houses. These taxes are hard to avoid and maybe they exist in some form already in Lebanon. Perhaps someone can explain if they do exist and if they are at proper levels and properly administered. I wish my fellow Lebanese all the best, but It seems we have a long way to go before we achieve a truly modern civic society. Is the education system failing in producing responsible adults?
Habib,
You have hit the nail on the head. An effective and an equitable tax system is one of the best methods to build respect for the law and a healthy relationship between government and the citizens.
Unfortunately Lebanon is a huge failure on this front. Witness that all taxes are just over 15% of the GDO and almost half of this is collected through VAT. This means that all other taxes amount to barely 7-8% of the GDP when they should be at least twice that. All the taxes that you have mentioned exist on paper but they are not collected efficiently. The only other reliable form of income for the government besides VAT is the direct deductions from wages. But what about all the income of the professionals a, the capital gains and all other forms of unearned income. I am not suggesting that Lebanon should be transformed overnight into a country with prohibitive tax structure. On the contrary, all what is needed is the establishment of an efficiently administered tax structure so that the most important principle in taxation will be implemented: Tax according to the ability to pay.
To Ghssan and Habib
You talk about the tax system in Lebanon as if it’s one of those developed countries that need tax reforms please get real…the rich people whom you implement pay more taxes considering their huge incomes , are the same eople who are right at this minute are robbing the poor and our shredded resources from any sort of financial support or social progressive growth. And here am not talking about extreme poverty relative to our country that face some non-lebanese minorities,but rather about mere secondary education for all our children. In 1975, I needed a referee who knew the principal to be admitted to a public high school, and believwe it or not this referee was a foreigner. To this day I wonder is Lebanon a home for all of us? we need a social revolution and a real leader that believes in equal rights, strong and patriotic enough to unify the lebanese people and youth without seeing ourselves through religious or political perspectives.
Dalal, MUCH has changed from the 70’s, you can’t make it sound like no-one new has entered this scene… Lebanon accepts US all whether Lebanese or non-Lebanese, we aren’t the 2nd Afghanistan you know. When you talk about unifying and patriotism, that shouldn’t be asked twice about the people, us living outside might see something slightly different, but believe me, from what I know and see in this country everyone is patriotic enough to classify themselves Lebanese before Christian, Muslim, Druze etc. This is an old view ‘religious perspectives’… Please let us just be more positive and optimisstic. Its the people that should change before the government changes them, but I agree on one thing, A LOT of people act depending on what their ‘heroes’ do.
Dalal (January 3)
Amen to that. I have repeatedly made the call for the dire need to have a radical change since the present structural set up is rotten to the core.
Unfortunately , many in Lebanon, confuse the wealth of the very few with signs of development. Expensive parties,fancy cars and exclusive residences for the privileged do not a developed society make.
A polarised socieity is not a good sign, these statistics shock me and need to be adressed to. The March the 14th Alliance and the March the 8th Alliance should use the huge sums of money they recieve from Saudi Arabia and Iran to adress this appaling issue
Just wondering didn’t Lebanon receieve millions in US dollars where did the $$$$$$$ go?????