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Banks strike over tax hike proposal

BEIRUT: Banks will go on strike Friday to protest proposed taxes to finance a salary raise for the public sector, as MPs struggle to wrap up a discussion on the pay hike.

The Association of Banks in Lebanon announced that banks would close for one day to protest a proposal to raise the 5 percent tax on deposit interest revenue to 7 percent that was approved by Parliament’s Joint Committees Wednesday.

In a statement, the group warned that such a step would have negative effects on inflation rates in the country, the stability of the national currency and the purchasing power of the Lebanese.

It added that it would contact President Michel Sleiman, Speaker Nabih Berri and Prime Minister Tammam Salam to explain the dangers of the proposed taxes and call for them to be replaced with alternative ones.

For their part, representatives of the business community expressed their opposition to the proposed increases on deposit interest revenues and the outlined taxes, including those on financial institutions.

“These random decisions that were made out of political outbidding aim at forcing Lebanese investors to leave their country and firing the coup de grace at the heart of the Lebanese economy, which is witnessing a situation it has never [before] passed through even in the darkest days of Lebanon as a result of the bickering of political groups,” they said in a statement after a meeting.

Meanwhile, Parliament’s Joint Committees continued to discuss the draft law which would raise the salaries of public sector employees and teachers, during a six-hour session. MPs focused on how to finance the hike.

The Joint Committees approved fines for property violations. The annual fine amounts to 2.5 percent of the value of any illegally obtained land and 7.5 percent of the value of any illegally constructed building on seafront properties. The law will have a retroactive five-year scope, but Finance Minister Ali Hasan Khalil said offenders should be taxed for every year of violation.

Speaker Nabih Berri initially chaired the session, but then left for other engagements, leaving MP Ibrahim Kanaan, the head of Parliament’s Finance and Budget Committee, to preside over the meeting.

During the session, Berri was quoted by MPs as saying that the salary raise would not cause a budget deficit, saying the state would pay as much as it would receive as new revenues.

Commenting on the stance of the Association of Lebanese Banks, Berri said the proposed taxes were well-studied and could be endured by the banks. Speaking to reporters after the session, Kanaan said he hoped the Joint Committees would finalize the draft law Friday.

They will then refer it to Parliament for final endorsement, which could happen over the weekend or early next week.

He said a parliamentary committee was discussing reforms that could be enacted in parallel with the salary raise, hoping this would appease banks.

Khalil will Friday receive Francois Bassil, the head of the ALB.

The joint committees also approved a proposal Wednesday to impose taxes on financial institution profits.

The intensified meetings followed union threats of escalating protests and strikes if the draft law was not endorsed by Parliament by the end of this week. Teachers and public sector employees went on strike Wednesday.

The Union Coordination Committee, a coalition of public sector employees and teachers that has been spearheading protests, blasted the rejection of the ALB to pay the taxes it owed.

“By this stance, it uncovered its true face, indicating that it always seeks to accumulate its fortunes and suck the blood of the Lebanese and their money,” the UCC said in a statement.

It reiterated its opposition to paying the wage hike in installments and called for preserving the rights of all employees and for avoiding taxation on the poor. The UCC will meet Friday afternoon.

Also Thursday, Berri chaired a legislative session that convened for the second and last day.

At the outset of the meeting, Berri called for voting again on a draft law to amend an article in the penal code, saying that the result of Wednesday’s vote was not clear in light of the commotion that broke out.

MPs amended Article 186 of the penal code, which previously did not criminalize “disciplinary measures taken by fathers and teachers against children that are permitted by custom.”

According to the amendment, the article would now not criminalize “nonviolent disciplinary measures practiced by fathers and mothers against their children on condition that they do not leave traces.”

During the two-hour session, Parliament also passed a draft law allowing private companies to produce electricity for the state-run Electricite du Liban for two years.

Lawmakers also endorsed a draft law stipulating that people who owe a penalty for failing to pay car maintenance fees (mecanique) and other fees on time could benefit from a 90 percent reduction in the penalty on the condition that they paid before Sept. 30.

Progressive Socialist Party leader Walid Jumblatt Wednesday put forward a raft of 15 proposals to reduce corruption and the squandering of state resources.

In a statement, Jumblatt proposed radical steps to resolve Lebanon’s chronic electricity problems. All Lebanese districts experience power rationing, which exceeds 12 hours every 24 hours in certain areas.

Jumblatt said that while the state pays EDL’s annual deficit of around $2 billion, it could use the amount paid over three years to instead construct new power plants and provide power on a 24/7 basis. Jumblatt said Lebanon had spent $19 billion on the electricity sector since the mid-1990s without finding a solution to the problem.

The PSP leader also urged the state to make better use of around 48,000 properties that it owns.

 
A version of this article appeared in the print edition of The Daily Star on April 11, 2014, on page 1.

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Summary

Banks will go on strike Friday to protest proposed taxes to finance a salary raise for the public sector, as MPs struggle to wrap up a discussion on the pay hike.

The Association of Banks in Lebanon announced that banks would close for one day to protest a proposal to raise the 5 percent tax on deposit interest revenue to 7 percent that was approved by Parliament's Joint Committees Wednesday.

Parliament's Joint Committees continued to discuss the draft law which would raise the salaries of public sector employees and teachers, during a six-hour session. MPs focused on how to finance the hike.

During the session, Berri was quoted by MPs as saying that the salary raise would not cause a budget deficit, saying the state would pay as much as it would receive as new revenues.

Commenting on the stance of the Association of Lebanese Banks, Berri said the proposed taxes were well-studied and could be endured by the banks. Speaking to reporters after the session, Kanaan said he hoped the Joint Committees would finalize the draft law Friday.

During the two-hour session, Parliament also passed a draft law allowing private companies to produce electricity for the state-run Electricite du Liban for two years.


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