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Mikati plan will drive up property prices: economists

Lebanon's Prime Minister Najib Mikati attends the annual meeting of the World Economic Forum (WEF) in Davos January 25, 2013. (REUTERS/Denis Balibouse)

BEIRUT: Prime Minister Najib Mikati’s proposal to allow real estate developers to add an additional floor in return for higher taxes could cause the prices of properties to soar beyond the means of average Lebanese citizens, economists say.

The prime minister’s office is convinced that the new proposal would generate at least $500 million a year for the Treasury.

But economist Ghazi Wazneh said the proposal, known as the “Mikati floor,” could secure revenues of $800 million in the first year.

Wazneh added that the plan could also see up to 1.47 million square meters of additional constructed areas across Lebanon.

But the economist warned that this type of tax could trigger an increase in the prices of properties, adding that this would exacerbate the housing crisis in the future.

He warned that this tax would also dramatically alter the look of Lebanese cities and increase pressure on infrastructure.

“Mikati’s proposal requires massive additional investments in infrastructure to cover the cost of the investment factor,” he explained.

He and other economists recommended a series of reforms that could save the Treasury a significant amount of money.

Among these measures is restructuring the troubled electricity sector, which is costing the Treasury more than $1.5 billion per year.

They also urged the government to speed up the issuance of oil permits for companies to drill for gas off the Lebanese coast.

Sources say that Central Bank governor Riad Salameh has advised Mikati not to take any hasty decision at this critical moment.

 
A version of this article appeared in the print edition of The Daily Star on February 20, 2013, on page 5.

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