Lebanon bets on higher taxes despite a fiscal turnaround

With government revenues surging 59% and public finances returning to surplus, Lebanon is pressing ahead with a new wave of taxes. The strategy is drawing criticism from economists, who argue that tackling tax evasion not raising the burden on households and businesses should be the government's priority.

Lebanon's public finances have improved markedly over the past year, yet the government continues to rely on higher taxation to finance additional spending. From the $4-per-gallon fuel levy introduced earlier this year to a planned 1% increase in VAT, alongside new import duties presented as environmental charges on water and waste management, the country's tax burden continues to rise.

For Nassib Ghobril, Chief Economist at Byblos Bank, the policy raises a fundamental question: why introduce new taxes when government revenues are already growing at a rapid pace?

Government revenue up 59%, yet taxes keep rising

The latest fiscal data paints a striking picture. In 2025, government revenues climbed to $6.2 billion, while public spending reached $4.7 billion. Budget revenues increased by 59% year-on-year, significantly outpacing the 30% rise in expenditure.

The result was a budget surplus equivalent to 31% of public spending one of the strongest fiscal performances Lebanon has recorded in years. At the same time, tax revenues increased from 9.3% of GDP in 2024 to nearly 13% of GDP in 2025.

Despite these figures, the government has continued to introduce new fiscal measures aimed at generating additional revenue.

Fuel, VAT and import charges add to household costs

Since February, motorists have been paying an additional $4 per gallon of fuel, a levy introduced to finance higher public-sector wages and pension increases. Authorities have also announced plans to raise VAT by one percentage point.

More recently, the government approved higher customs duties on a broad range of imported goods under the banner of an environmental levy intended to fund waste management. Although presented as an environmental measure, economists warn that the additional charges will ultimately feed through into higher consumer prices, affecting a wide range of products, including equipment linked to water infrastructure and essential public services.

Up to $1.6 billion lost each year to tax evasion

According to Ghobril, Lebanon has significant untapped sources of revenue that could be mobilized before asking taxpayers to contribute more.

His estimates suggest that tax evasion cost the government between $1.2 billion and $1.6 billion annually between 2011 and 2019.

Customs revenues also remain well below potential. While Lebanon imported approximately $21 billion worth of goods last year, customs collections amounted to only $1.2 billion. With stronger border controls and improved enforcement, Ghobril believes those revenues could approach $2.5 billion.

Structural reform before higher taxes

Beyond tax collection, Ghobril argues that controlling public spending should become the government's central priority.

He calls for the closure of around 90 public institutions that he believes no longer serve a meaningful purpose and estimates that Lebanon's public administration still contains approximately 20,000 "ghost employees." He also advocates opening strategic sectors including electricity, water, telecommunications, transport infrastructure and airports to greater private-sector participation and competition.

A different fiscal philosophy

For Ghobril, the debate extends far beyond taxation itself. "The state should not regard citizens as a source of revenue. On the contrary, the public sector exists to serve citizens, who ultimately finance the state through their taxes."

In his view, rebuilding confidence will require more than additional tax measures. It will depend on a more efficient public administration, lower waste, stronger enforcement against tax evasion and structural reforms capable of restoring trust in Lebanon's public finances.