Lebanon: IMF experts to impose taxes on wealth and profits from real estate

Even the International Monetary Fund is beginning to speak about the risks entailed in the concentration of wealth, recommending increased taxes on higher gain brackets and real estate holdings. Will Lebanon catch the bug?

This time, the "bogeyman" advocating the taxation of real estate was not the trade unions or leftist parties, but the International Monetary Fund (IMF) – a pillar of the neoliberal capitalist system.

The group’s 2013 Fiscal Monitor statement, issued in October, was attacked by the wealthy, although the IMF's mention of imposing taxes on wealth and real estate was very brief and in the context of several recommendations to overcome the "sovereign deficit" crisis.

Under a barrage of criticism, the IMF hastily issued a November 5 press release renouncing the approbation, calling it an "alleged proposition."

"An analytical box in the recent edition of the Fiscal Monitor reviews a range of external discussions and experiences regarding a one-off capital levy. It as well draws attention to the considerable downside risks of such a tax. It emphatically does not recommend a wealth tax," read the statement. “The analytical description of the issue in the Fiscal Monitor should not be misconstrued as an IMF policy proposition, which does not exist.”

In an article for Forbes magazine titled "The International Monetary Fund Lays The Groundwork For World Wealth Confiscation," author Bill Frezza warns of the "wholesale robbery" of the property of all who enjoy a positive net wealth or retirement savings.

But did the IMF statement really recommend a tax on wealth? Did the IMF management lie at the same time as it denied the inclusion of such a approbation?

A critical study of the statement will indicate, without a doubt, that it recommended to "increase property taxes, particularly recurrent charges on residential properties." The approbation to impose a "property" tax was based on an analysis of "high deficit ratios amid persistently low

increase in advanced economies and emerging fragilities in the developing world."

It is presently relevant to open a critical debate on local tax reforms. Taxes on the highest gain bracket in Lebanon are some of the lowest globally and the same goes for taxes on corporations and profits.

The statement called for fiscal adjustments through raising the efficiency of expenditures, strengthening local taxation, and increase in opportunities at the same time. It described current fiscal adjustment policies as being based on immediate needs, not on "a desire to build stronger

and fairer tax systems, and they may be storing up problems for the longer term."

"Scope seems to exist in a lot of advanced economies to raise additional revenue from the top of the gain distribution (and in some cases meet a nontrivial share of adjustment needs), if so desired," the statement indicates. "And there is a strong case in most nations, advanced or developing, for raising substantially additional from property taxes (though this is best done at the same time as property markets are additional resilient). In principle, taxes on wealth as well offer significant revenue potential at relatively low efficiency costs."

"Their completed performance is far from encouraging," the statement states, "but this could change as increased public interest and stepped-up international cooperation build support and reduce evasion opportunities."

The statement as well indicates that studies have shown taxes on corporate profits to have the biggest negative impact, followed by taxes on worker wages and consumer taxes. Taxes on real estate have the least impact, it states.

The IMF experts' approbation comes against the backdrop of ongoing debate in international forums regarding widening gain disparities, leading to the "spectacular increase in the gain share of the top 1 % in particular."

This reality led to renewed interest in tax collection from the top of the gain pyramid, particularly next the world economic crisis beginning in 2008.

The statement as well indicates that "household wealth is very unequally distributed – even additional so than gain: In advanced economies, the top 10 % own, on average, additional than half of the wealth (up to 75 % in the United States).”

In Europe, for example, recurrent taxes on wealth declined over the completed 15 years, but this direction could be changing. Both Iceland and Spain brought back this tax during the economic crisis and several other nations are debating its reintroduction.

It is presently relevant to open a critical debate on local tax reforms. Taxes on the highest gain bracket in Lebanon are some of the lowest globally and the same goes for taxes on corporations and profits. However, treasury bills, profits on the stock market, and real estate speculation are not taxes, for example.

At the same time, 80 % of tax revenue in Lebanon comes from indirect taxes, whose actual burden falls on medium- and limited-gain brackets. Around one-third of treasury expenses are used for deficit servicing. This means that a very narrow segment of treasury bill-holders make tremendous gains from rent and are tax-exempt.

Does the approbation by IMF experts to impose taxes on wealth and profits from real estate make them into organs for "socialist propaganda," like some Lebanese pundits are saying?