The Lebanese State is seeking to increase its revenue in an economy whose capacity to pay remains fragile. The tightening of the recovery announced by Yassine Jaber comes as domestic VAT revenues decline over a year in the first half of the year. At the same time, Fouad Zmokhol warns against a policy that favours levies at the expense of activity.
These elements do not describe a simple choice between tax and growth. The Minister of Finance himself distinguishes between the real difficulties of companies and the refusal to pay. Tax data also requires careful reading. An increase in receipts does not always prove a recovery. A decrease may also reflect a change in timing.
Tax collection also covers amounts already collected
Yassine Jaber announces the transmission of 107 cases to the financial prosecution. They concern companies and institutions which have failed to comply with their obligations. According to the Minister, legal proceedings follow warnings and claims for payment. Other files remain under review.
The figure therefore does not represent all tax offences. Nor does it refer to companies already condemned. The Minister presents the judicial referral as a last resort. It also recalls the existence of measures to settle and reduce penalties to facilitate regularisation.
Jaber drew an important distinction between two situations. Income tax is a corporate debt. VAT collected from consumers must be returned to the Treasury. The Minister considers the retention of these amounts to be more serious, as they were collected on behalf of the Crown.
This distinction makes it possible to clarify the debate on capacity to pay. A company may experience low activity while retaining taxes already collected. Conversely, any difficulty in paying a debt does not prove a willingness to fraud. The recovery policy must therefore distinguish between real economic difficulties and deliberate escape.
However, the Minister refuses to announce the expected amount of 107 files. It awaits the necessary audits and procedures to establish a final sum. He explained that premature estimation could damage businesses or create excessive expectations. The number of files submitted cannot therefore be used to calculate an acquired revenue.
VAT revenue does not provide a direct measure of consumption
The Ministry of Finance data for the first half of 2026 show a 10.8% decline in VAT on domestic transactions over a year. It reaches £28,100 billion. Import VAT rose by 2.5% to £52,700 billion.
The two categories thus evolve in different directions. About 65% of the VAT of the six months comes from imports, compared with 35% from domestic transactions. This gap indicates a fragility of domestic collection, not sufficient to measure consumption. Receipts must be reviewed with their timing and attitude.
The second quarter shows a particularly marked decline. Domestic VAT rose from £25,100 billion to £13,600 billion, representing a 45.9 per cent decline. Over the same period, import VAT decreased by 6.2%. Total VAT falls by 24.7%, based on these data.
However, a timing effect changes the scope of this comparison. The payment of VAT in the fourth quarter of 2024 had been postponed to 20 June 2025. This carry-over had moved some of the cash receipts towards the second quarter of 2025. The basis of comparison is therefore disturbed. A 45.9 per cent drop in collection does not mean an identical decrease in consumption.
However, the distinction between domestic and import VAT remains useful. The first provides information on taxable transactions within the country. The second depends in particular on the value and composition of imported goods. It does not automatically measure their final sale to consumers. Adding recipes without distinguishing their origins can therefore mask different evolutions.
Reduced activity limits sustainable revenue growth
These movements occur in an economy whose trade and tourism are affected by war. The travel flows published by the Bank of Lebanon illustrate this fragility. In the first half of the year, arrivals would have decreased by 37% over a year. They would have increased from about 1.6 million to about 1 million.
These data shed light on the environment of consumption, without alone explaining each tax variation. Prices, applied rates and payment deadlines also apply. Some revenues on imports and fuels can thus be increased by means of recorded levies. This growth alone does not show an increase in activity.
The quarterly reading of tax revenues illustrates this difficulty. Data show a 45.1 per cent increase in the first quarter and a 12.7 per cent decrease in the second. These variations should not be transformed into economic growth rates. They show above all the importance of distinguishing the return of a tax from the strength of its base.
For the State, therefore, the stakes exceed the immediate cash flow. Businesses must maintain an activity, invest and use to support revenue over time. It is on this point that the criticism developed by Fouad Zmokhol joins the data review. Better collection can respond to an emergency without solving the income generation problem.
Zmokhol distinguishes fiscal balance from economic recovery
Fouad Zmokhol reviews the initial draft budget 2027. It shows expected tax revenues of over £528,000 billion. They would represent approximately 86 per cent of the projected income. These figures relate to budgetary forecasts, not to amounts already received.
The President of MIDEL, also Dean at Saint Joseph University, does not dispute the principle of taxation. It recognizes the need to finance public wages, services and social protection. It also defends the fight against fraud. His criticism relates to the timing of levies, their distribution and their economic effects.
It describes households that have lost part of their savings and the purchasing power of their wages. Expenditure on health, education, energy and transport weighs on their resources. Companies also bear high costs and insufficient bank financing. Some reduce their investments or use their own resources to continue operating.
Zmokhol insists on the combination of taxes and private payment of essential services. A household contributes to public financing while directly regulating electricity, water or care. This additional burden reduces the resources available for other expenses. In its argument, the real capacity to pay must therefore remain at the centre of fiscal policy.
The risk it describes takes the form of a vicious circle. Increased burdens hinder consumption and investment. The weaker activity then limits employment and business expansion. Future revenue growth is becoming more difficult. The State may then seek new levies on an ever closer basis.
Expand compliance without penalising only accessible taxpayers
The Minister’s and Zmokhol’s proposals meet on several points, despite their different perspectives. Jaber highlights simplification of procedures and electronic services. He referred to the cleaning of the register of inactive or fictitious companies. He is also working on electronic invoicing and crossing tax data with other jurisdictions.
These tools are presented as ongoing projects or work. The Minister cites customs and land data to guide controls. It also advocates better recognition of compliant taxpayers. Its stated objective is to increase spontaneous compliance, rather than to increase prosecution.
Zmokhol also recommends digitisation, combating waste and widening the base. It asks, however, not to target businesses in good standing simply because they are easy to control. It combines taxation with support for small productive enterprises, investment and expenditure reform.
The dispute thus relates less to the need for revenue than to its lasting origin. The 107 files still have to produce verifiable judicial and financial results. The draft budget is based on estimates. Between these two horizons, VAT data require separate monitoring of collection, timing changes and changes in activity.
Sources
Ad Diyar, November 2, 2026, page 3; Al Akhbar, page 5; Al Joumhouria, page 8.
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