Protesters blocked a key road in Lebanon's capital on Tuesday after a government decision to raise value-added tax and petrol prices to fund an increase in public-sector salaries amid several economic problems that continue to hurt the average person.
The cabinet on Monday night approved an increase in the price of a 20-litre can of petrol by more than $4. It rose from $15.90 to $19.93. There was no increase in diesel prices, as many in Lebanon rely on it to run private generators to make up for severe shortages in state electricity.
VAT was raised by one percentage point, from 11 per cent to 12 per cent.
The move caused widespread anger, with protesters blocking a motorway connecting the east and west of Beirut. The road was reopened after the Lebanese army intervened, but demonstrators are again expected to gather later on Tuesday.
Unions condemned the government's move as unfair to the average citizen, and questioned why the cabinet was not looking to raise funds through progressive taxes on banks and major companies.
The president of the General Confederation of Lebanese Workers, Bechara El Asmar, called for “an emergency meeting to examine measures to be taken to stop the systematic destruction of the working class”.
Finance Minister Yassine Jaber said the VAT increase would require legislation to take effect, but the fuel price increase would be immediate. “Granting the increase [in public sector salaries] without corresponding revenue exposes the country to a crisis”, he said.
“More than 50 per cent of the budget today is allocated to salaries, and it was necessary to take steps to secure the funds,” he said.
There was also anger at Prime Minister Nawaf Salam's government for seeking to portray itself as devoted to a reformist agenda. There have been repeated calls to reform Lebanon's bloated public sector.
Mr Salam said on Tuesday that other measures were being considered to raise funds, including bolstering tax and customs duty collection.
Some cabinet members opposed the decision, including the Minister of Energy and three other ministers, all of whom were nominated by the Lebanese Forces party. They called for a detailed study to better understand the repercussions.
“What our ministers were able to do was object, and they did whatever they could, but they couldn't prevent it from being taken to a vote,” said an official close to the bloc of four ministers.
“It's not about just raising taxes without having a purpose. It should be part of a whole vision of the economy.”
Justice Minister Adel Nassar also objected, saying he hoped any decision would be “based on a clear and well-considered assessment of its impact on inflation” and poverty.
Anger over the petrol and VAT increases recall the nationwide demonstrations in 2019 caused by a proposal to tax WhatsApp voice calls. The protests ultimately led to the collapse of the government.
The economic crisis that first became apparent that year has been described by the World Bank as one of the worst in modern history. The real value of salaries plummeted as the local currency lost about 98 per cent of its value.
