Saving the legitimate private sector must be a top national priority

The Lebanese Businessmen and Women Association (RDCL) organized a dialogue session with a group of journalists at its general headquarters in downtown Beirut. The media personnel were received by Mr. Nicolas Bou Khater, Chairman of the Association’s Board of Directors, and Mr. Kamal Abi Fadel, General Manager. The meeting focused on the existential risks facing the legitimate Lebanese private sector, which is gradually eroding in light of the presence of illegitimate sectors in various fields, in addition to the urgent reforms required, redefining the role of the state and restructuring its size in partnership with the private sector.

During the meeting, Bou Khater stressed the seriousness of the current bleak reality in Lebanon, and the necessity of adopting a comprehensive vision and stopping the policy of patchwork solutions, because it has proven to be of no benefit, pointing out that the situation is deteriorating and becoming increasingly difficult, and it will not improve if a vision is not prepared. Comprehensive and radical solutions to known problems. During a presentation, Bu Khater explained the details of many of the main issues facing the legitimate private sector, including fierce competition from the illegal private sector, high costs of electricity, salaries and rents, as well as customs duties and taxes, considering that these challenges have led to a significant decline in sales for many. Of companies, because they compete with illegal sectors that do not pay any kind of taxes.

Bou Khater also mentioned the problems of the monetary economy, explaining that the volume of monetary exchanges has exceeded 50%, as a result of the lack of confidence in the Lebanese financial system as a whole. This matter negatively affects Lebanon’s reputation abroad, which is why the group demanded and continues to demand an accelerated program with the International Monetary Fund. In the same context, Bou Khater highlighted the impact of Lebanon’s potential placement on the Financial Action Task Force (FATF) gray list, stressing the need to take immediate action to improve Lebanon’s compliance status. He added that the legitimate private sector is in an extremely dangerous situation, as it faces an illegal private sector whose size is estimated to be equivalent to 65%-70% of the market size. He added that the illegal sector competes with the legitimate sector daily for all goods and services, explaining how this illegal sector undermines the legitimate private sector, through its evasion of paying taxes and selling goods at lower prices, as well as customs evasion, and smuggling, which leads to unfair competition and losses. A huge financial loss for law-abiding companies.

Bou Khater also spoke about the high tax rate in Lebanon, comparing it to those imposed in a country where the economy is based on the knowledge economy and sells its services abroad.
He gave the example of the United Arab Emirates, where taxes on corporate profits are 9% and dividends are 0%. Likewise, in Singapore, taxes on the company’s profits are 17% and 0% on its distribution. While in Lebanon, the corporate profits tax is 17% and 10% on the distribution of profits, which raises the number to a total of 25%, which is considered a very high number and does not encourage competition or attracting investors, especially since there is nothing for citizens in return for these taxes in Lebanon.

To confront these challenges, Bu Khater proposed several solutions, including comprehensive financial restructuring, amendments to loan laws to activate them, reducing customs duties, as well as structural and immediate solutions to the problem of the National Social Security Fund. He also stressed the necessity of appointing an electricity regulatory body, a competition body, and a complaints body, as required by the Public Procurement Law, and activating the partnership law between the public and private sectors. He also called for opening doors to international markets for Lebanese products and services.

Despite the dark situation, Bou Khater stressed the importance of optimism and hard work for Lebanon’s salvation. He stressed the importance of restructuring the size of the state and revising Lebanon’s public investment budget to address the deficit and stimulate economic growth. At the end of his speech, Bou Khater praised the resilience of the Lebanese private sector, which faces enormous challenges with steadfastness and determination. He stressed the need for reforms to precede any increase in taxes to protect and revive the legitimate private sector, and to enlarge the tax plate, calling for a rethink of the role of both the public and private sectors, stressing that their partnership is necessary for the recovery of the Lebanese economy.