Wednesday, December 30, 2009

Lebanese Decadence?

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.

1 comment:

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