The Minister of Finance Mr. Youssef Khalil submitted to the government last week the draft budget law for the year 2022, anticipating a deficit of LBP 10,262 billion (20.77% of budgeted expenditures). In details, the budget anticipates revenues at LBP 39,154 billion, and expenditures at LBP 49,416 billion. When including advances to Electricité Du Liban (EDL) amounting to LBP 5,250 billion, the projected deficit figure would increase to LBP 15,512 billion (31.39% of total anticipated expenditures). Said target figures compare to LBP 13,426 billion (191.63% increase) in government revenues, LBP 18,529 billion (166.70% rise) in budgeted expenditures and advances to EDL of LBP 1,500 billion (250.00% expansion) in the 2021 budget law. The main reason behind the huge variation between the 2021 and 2022 budgets, and particularly on the expenditures front, owes to the adoption of an exchange rate ranging between LBP 15,000 per USD and LBP 20,000 per USD. Revenue wise, the draft budget suggests a high contribution from tax revenues (LBP 33,598 billion), representing 85.81% of total revenues, with non-tax revenues (LBP 5,555 billion) expected to represent 14.19%. Delving into details, levies on goods and services (LBP 19,737 billion) are budgeted to be the major contributor (50.41%) to total revenues, with the share of income tax (LBP 5,901 billion) and levies on international trade (LBP 3,382 billion) accounting for 15.07% and 8.64% of total revenues respectively. The draft budget proposes expanding the range of income tax brackets on salaries, bearing in mind that a significant portion of private sector salaries are now denominated in local dollars (lollars), in an endeavor to boost income tax revenues. The same logic was applied to earnings by freelancers/entrepreneurs. Always on the income tax front, the draft budget required that all salaries (whether public or private sector) need to be domiciled at banks to help increase transparency. The draft budget also suggests imposing a 10% levy for a period of 7 years on imported goods that have substitutes made in Lebanon in amounts that cover local consumption in an attempt to encourage local production and dissuade import of such goods. The draft budget law also “dollarized” a number of fees, namely airport taxes, taxes on arrivals and departures from Lebanon (whether via the ports or airport) and fees collected by Lebanese embassies or consulates abroad. It is worth noting, in this perspective, that the concerned budget law grants the authority to the Lebanese government to determine the applicable exchange rate to determine the LBP counter value of “dollarized” taxes and fees. The draft budget law also increased the applicable taxes/fees on a host of other services rendered by the state. However, the draft law provided a set of tax incentives and waivers for start-up companies, newly-established companies (60% Lebanese taskforce) that operate in areas specified by the government that need development, and offshore companies while also relieving travel groups (consisting of seven people and above) from fees related to residency in Lebanon for a period of three years among other incentives. On the expenditures front, social benefits constitute more than a quarter (29.18%) of total projected expenditures, followed by expenditures for urgent and exceptional measures (18.64%) and salaries & remunerations (13.80%). In this regard, and while the budget provides no adjustments to the wages and salaries of public sector employees, it suggests extending such employees with some benefits. On the other hand, the proposed budget restrained the range of benefits presented to heirs of public sector employees, while easing the conditions related to the retirement of public sector employees in an endeavor to reduce the size of the public sector, bearing in mind that this issue constitutes one of the main requirements of the International Monetary Fund and other donor institutions.