BEIRUT — On Monday, the Lebanese government approved a rise in the value-added tax (VAT) from 11% to 12% and imposed an additional 320,000 Lebanese lira levy on every gasoline canister.

Officials justified the measures as necessary to finance an $800 million wage increase for public sector employees. In reality, however, this decision reflects a deeper structural problem: a government increasingly beholden to the policy frameworks of the World Bank and the International Monetary Fund, while ordinary citizens—especially the poor—bear the cost.

Undeniably, the financial collapse devastated public sector wages, and correcting them is a governmental responsibility. 

Yet funding wage adjustments through regressive taxation undermines the very social stability the government claims to protect.
Indirect taxes such as VAT and fuel levies disproportionately affect low- and middle-income households because they consume a larger share of their income.

By contrast, wealthier groups can absorb these increases more easily!

The gasoline tax hike alone will ripple across the entire economy. Fuel is not just another commodity; it is a core input in transportation, logistics, and production.

When fuel prices rise, transport costs increase for both individuals and businesses. Employers pay more to move goods and to subsidize workers’ commutes.

These added costs are quickly passed on to consumers in the form of higher prices for nearly all goods and services. A single decision, therefore, triggers broad inflationary pressure.

Economists emphasize that fuel demand is relatively inelastic—families cannot simply stop consuming fuel when prices rise. 

Transportation remains essential for work, education, and basic services.

As fuel expenses climb, households compensate by cutting spending elsewhere. The result is a direct erosion of purchasing power.

The government, despite boasting of economic “growth” in 2025—largely driven by consumption—now risks undermining that very growth by weakening household demand.

The VAT increase compounds the problem. By definition, VAT targets consumption. A higher rate immediately translates into higher retail prices, further fueling inflation in a country where price stability has yet to be restored. Instead of improving tax collection mechanisms—long recognized as inefficient—the government opted for the easiest path: raising rates.

Ironically, IMF reports have repeatedly noted that weak compliance and narrow tax bases undermine VAT revenues in Lebanon more than the nominal rate itself. Raising taxes without reforming collection systems risks expanding evasion while deepening social hardship.

This pattern mirrors earlier policies. Rather than undertaking structural reforms, successive governments have favored quick revenue fixes aligned with international lenders’ recommendations.

The logic is technocratic and accountant-like: adjust fiscal indicators, secure external approval, and present short-term improvements in budget figures.

Missing from this calculus is a coherent social and economic vision centered on justice and equity.

The tragedy is not only economic but also political. Government officials have pledged reform and social justice, yet they approved sweeping consumption taxes with minimal debate and limited transparency.

In doing so, they effectively shifted the burden of “correction” onto the most vulnerable segments of society. The poor will now finance wage adjustments for other struggling groups, creating a cycle in which hardship is redistributed rather than resolved.

Lebanon’s crisis indeed cannot be solved through regressive taxation that shrinks purchasing power and fuels inflation. 

Genuine reform would prioritize progressive taxation, improved enforcement, anti-corruption measures, and economic policies that stimulate productive growth.

Without such changes, the state’s growing alignment with international financial institutions will continue to come at the expense of its own people—leaving the poor as collateral damage in a policy framework designed more for balance sheets than for human dignity.