Haddock, Fiona, Global Finance
Fifteen years of civil war certainly takes its toIL Lebanon, once revered as the Paris of the Middle East, today groans under the weight of its enormous public deficit Fiona Haddock asks Lebanon's minister offinance, George Corm, bow he's coping.
Lebanon's public debt currently stands at about 120% of the gross domestic product-the direct result of the country's mammoth postwar reconstruction effort. Minister of finance George Corm, who came to office in December last year, does not have an easy-or popular-job, already provoking the ire of the public and private sectors on a number of occasions. But he appears to be tackling his task with gusto, borrowing the slash-and-burn tactics of a military raid.
The new government has recently prepared and adopted a five-year blueprint for fiscal reform. The overriding objective is to reduce the levels of budget deficit and gross public debt to approximately 5% and 96% of GDP, respectively, by 2003. And Corm emphasizes that such figures are "very conservative" estimates.
The plan involves overhauling Lebanon's taxation system. A general income tax system, which includes a value-added tax, is to be introduced. Corm is set to hike the tax on profits and income in this year's budget, with individual tax rates jumping from 10% to a maximum of 20%. Corporate income tax, meanwhile, will rise from 10% to 15%.
Not surprisingly, there has been much resistance to these reforms.
Corm, however, is basking in the success of seeing his budget finally passed and is confident that public opinion is turning around. Says the finance minisster: "Any resistance would have come from the parliament-but our reforms have been passed.There was the naive belief that increasing taxes would deter foreign investment.With better education of the public over the past seven to eight months, we have been successful in changing this perception. They now realize we can't function with such low taxation-that it would lead to a catastrophe. …