State eyes new taxes to offset public salary raise

Upgrading public sector salaries will cost
Treasury an extra $1 billion each year

The long-awaited new salary scale for the public sector is expected to materialize around the end of this month.

The deal was achieved through extensive deliberations between the ministerial committee tasked with amending the pay scale and the Union Coordination Commission, a union representing public sector employees and public and private schoolteachers.

The cost of upgrading public sector salaries is estimated at $1 billion. In 2011, the government paid out around $3 billion in salaries, wages, and related benefits, representing the second largest component of primary spending, after energy production.

The 2012 draft budget, approved by Cabinet earlier this month, capped public spending at $14.2 billion.

The Ministry of Finance has proposed a basket of new taxes and fees to finance the salary upgrade. These include a tax to be paid on private generators that sell power to the community, at a rate of $1 for each kva. They also include increasing some fees paid for annual vehicle inspection (i.e. mechanic), and raising the fee on revenue stamps used in official paperwork. The MoF also proposed increasing fees on seaside properties, as well as imposing firmer customs control at border crossings in order to curb tax evasion. “The State is losing $700 million per year in uncollected customs fees,” said Nehmeh Mahfoud, president of the Association of Private School Teachers.

The new salary scale would give some 200,000 public sector employees the raise that the private sector received in January. It will also correct the pay scale for government employees and public and private schoolteachers.

Reported by Hanadi Chami