The Caretaker Minister of Finance Mr. Youssef Khalil recently submitted to the government the draft budget law for the year 2023 targeting a deficit of LBP 34,184 billion (18.79% of budgeted expenditures). In details, the budget anticipates revenues at LBP 147,739 billion and expenditures at LBP 181,923 billion. It is worth noting that unlike previous years, the 2023 budget law does not include an advance to EDL after the latter revised its tariffs during the year 2023 to stand above production costs. Said target figures compare to LBP 40,873 billion (261.46% increase) in government revenues and LBP 49,416 billion (268.15% rise) in budgeted expenditures in the 2022 budget law. The main reason behind the huge variation between the 2022 and 2023 budgets owes to the adoption of the Sayrafa exchange rate in the 2023 draft budget, which exceeds by far the LBP 15,000 per USD and LBP 20,000 per USD exchange rates adopted in previous year’s budget. Revenue wise, the draft budget suggests a high contribution from tax revenues (LBP 112,768 billion) representing 76.33% of total revenues, with non-tax revenues (LBP 34,972 billion) expected to represent 23.67% of target revenues. Delving into details, levies on goods and services (LBP 58,134 billion) are budgeted to be the major contributor (39.35%) to total revenues, with the share of income taxes (LBP 18,048 billion) and levies on international trade (LBP 12,505 billion) accounting for 12.22% and 8.46% of total revenues respectively. The proposed budget law mainly introduced a host of new taxes as well as increasing existing ones in an endeavor to boost revenues. In details, 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) and in fresh dollars in order to bolster income tax revenues. The same logic was applied to earnings by freelancers/entrepreneurs. The draft budget law allowed enterprises on an exceptional basis, and up until the year 2026, to revalue their fixed assets on a yearly basis, while adjusting the tax on revaluation surplus to 15%, up from 10% previously, while gains used to extinguish losses were kept tax-free. In addition, and in order to combat tax evasion, the draft budget law requested banks to directly deduct 3% of the accounts of deceased customers before transferring said accounts to the heirs. In addition, the proposed law suggests levying a 2% tax on earnings of individuals and companies (residing outside Lebanon) conducting services on the internet to the benefit of Lebanese residents. The draft budget also introduced several measures that aim at protecting the Lebanese manufacturing sector. The draft budget law also imposed a 10% tax on all raw materials being exported outside Lebanon, as well as levying fee on sugary and alcoholic drinks. The draft budget also proposed multiplying fees on public administration transactions by a factor of 30, and judicial fees by a factor of 10 as well as increasing the fines on delays in payments of taxes. On the other hand, the draft budget law proposed sizeable tax exemptions and discounts (custom fees and registration fees) on imported electric and hybrid vehicles. On the expenditures front, social benefits constitute nearly half (44.83%) of total budgeted expenditures, followed by salaries & remunerations (16.75%) and financial expenditures (7.08%). It is worth noting however, that as per the proposed budget law, the aforementioned social benefits to public sector employees are not to be included in the basic salary, and accordingly will not be incorporated in the calculation of end of service (EOS) indemnity.