At the entrance to a fuel station in Beirut, Abu Mohammad stands in a long line. He says any increase in fuel prices will come straight out of his daily bread.
A taxi driver for 20 years and a father of three, he drives a car with peeling paint and worn-out seats. It is his only source of income.
“Twenty dollars,” he says quietly to the attendant. He buys only the minimum amount of fuel that allows him to get through the day. He watches the numbers climb slowly, perhaps calculating how many rides he will need today just to cover the cost of gasoline.
Last Monday, Lebanon’s government approved a new increase in gasoline prices, adding 300,000 Lebanese pounds per tank – about $3.30 – while simultaneously raising the value-added tax (VAT) by 1%. The government says the move is aimed at funding salary increases for public-sector employees.
The decision was passed in a formal cabinet session. Its figures are clear on paper, but its real impact has begun to reveal itself at fuel pumps and in the daily cost-of-living calculations.
“The increase hurts,” Abu Mohammad says as he carefully folds a banknote. He notes that many of his passengers speak bitterly about the tax decision, and that government employees among them say any salary raise will quickly be eaten away by higher fuel prices and VAT.
Many public-sector workers themselves see little reason to celebrate. They understand that a new inflationary wave is likely to swallow the raise, especially in an economy that depends heavily on imports, where transportation costs are rapidly passed on to consumer prices.
As for Abu Mohammad, no paycheck awaits him at the end of the month. His income is daily. If he gets sick, he loses that day’s earnings. If his number of customers drops, so does his income. Every new increase simply means working more hours to end up exactly where he stood before the government’s decision.
The cabinet’s approval sparked widespread protests. Taxi drivers and citizens blocked several roads in different areas in protest, causing severe traffic congestion.
In a statement, Bassam Tlais, head of the federations and unions of the land transport sector, said he supports improving wages but “rejects placing this additional burden on citizens and the transport sector.”
He warned that any increase in fuel prices or VAT would immediately be reflected in transportation costs and the prices of goods.
Beshara al-Asmar, head of the General Confederation of Lebanese Workers, also rejected the decision, saying in a statement that “the government should have sought other sources of funding, rather than granting an insufficient raise that is not incorporated into base salaries, then immediately clawing it back before implementation – while burdening working and military classes with additional tax pressures that negatively affect all segments of society.”
Paul Zeitoun, head of the Lebanese Federation of Workers’ and Employees’ Unions, described the government’s decision as “a new crime” against a people who are “choking daily on poverty, hunger, and unemployment.” He said the taxes would be “the spark that drives people into the streets.”
The Consumer Association of Lebanon criticized what it called the government’s “insistence on the same past tax policies that place the burden of failed economic and social policies on the poorest consumers – policies that have repeatedly led to crises and to the country’s financial collapse in 2019.” The association said the government is adopting an “unjust” approach under the pretext of appeasing the International Monetary Fund.
By contrast, Prime Minister Nawaf Salam defended the tax increase – particularly the VAT hike – saying it “does not exceed 1% and targets higher-consumption groups, with the aim of financing salary increases for public-sector employees and retirees.” He insisted the measure “does not affect lower-income classes,” stressing that pay raises for soldiers and public employees are “deserved.”
Finance Minister Yassin Jaber explained at a press conference that the cost of raising public-sector wages amounts to about $800 million, distributed as follows: six additional salaries ($620 million), increased family allowances ($100 million), and equalizing military retirees with education grants ($70 million). He said the gasoline price increase was implemented immediately to prevent speculation, while the VAT increase requires legislation from parliament.
Double Pressure
The impact of the government’s decision “will not remain confined to fuel stations or shopping bills,” said economist Walid Abu Suleiman. Writing on the platform X, he explained that “higher gasoline prices immediately raise transportation costs, which are then automatically transferred to distribution and delivery costs. Prices begin to rise gradually across consumer goods and services – from supermarkets to delivery services, from transportation to maintenance.”
Khaled Abu Shakra, a researcher at the Lebanese Institute for Market Studies, said VAT is not inherently negative, as basic goods are theoretically exempt at a 0% rate. However, Lebanon’s near-total reliance on imports means that production inputs and packaging materials are subject to VAT, automatically raising the cost of goods.
He warned that adding 1% to VAT-eligible goods will push prices higher domestically and could open the door to retaliatory fees on Lebanese exports, weakening competitiveness and limiting the inflow of foreign currency.
According to his estimates, VAT revenues in the 2026 budget stand at about $2 billion, though they should reach nearly $3 billion – indicating roughly $1 billion in annual tax evasion. “Improving collection by just 11% would be enough to generate revenues that eliminate the need for additional taxes,” he said.
As for customs duties, revenues range between $570 million and $600 million, despite imports totaling $21 billion in 2025 – an effective rate of just 2.7%. Raising that rate to between 5% and 7%, he said, could increase revenues to between $1.5 billion and $2 billion.
Regarding public-sector salaries, Abu Shakra said the mistake lies in approving raises before restructuring. Any increase not paired with administrative reform, he argued, is merely a superficial fix that fails to address the root of the problem.
“The sector employs about 320,000 people, with annual wage costs of roughly $3 billion,” he said. “That number could be reduced to around 250,000 while redistributing the same wage bill to improve salaries sustainably – by shutting down unproductive entities such as the railway authority, privatizing sectors like electricity and telecommunications, addressing overstaffing in public administration and education, and using technology to reduce human-resource costs.”
He noted that public-sector employees have regained about 80% of their 2019 salaries, while roughly 70% of private-sector workers still earn less than half of their previous wages.
A large number of lawmakers have rejected the government’s decision to impose new taxes, saying it directly undermines citizens’ ability to cope amid the absence of structural reforms.
MP Ihab Matar criticized what he described as the government’s “congratulations” to Lebanese citizens on the eve of Ramadan. Writing on X, he noted that “a $6 monthly WhatsApp fee was enough to spark a revolution – so what about a $3.30 increase per gasoline tank, equivalent to about $13 per month in the transport sector, plus a VAT hike?”
MP Walid al-Baarini warned that the 1% VAT increase could turn into multiple price hikes due to the greed of some traders, urging the government to monitor prices and cautioning that “1% could become 100% for some merchants.”
MP Cesar Abi Khalil said the authorities are returning to “the policies of the 1990s that led to stagnation, deficits, and collapse.” MP Nicolas Sehnaoui said that while “fairness to employees came quickly, the citizen’s pocket was quicker to absorb the cost,” adding that the rhetoric of social justice is “paid for quietly by every household.”
By contrast, MP Hadi Abu al-Hassan stressed the need for genuine reforms—curbing tax evasion and adopting progressive taxation and a wealth tax – arguing that such proposals have already been submitted in previous draft laws and are preferable to imposing additional burdens on citizens.
In a modest vegetable shop in a Beirut neighborhood, Umm Hadi holds a tomato, her eyes fixed on the prices.
“If gasoline goes up, transportation goes up. Shipping goes up. Everything absorbs the cost of the increase,” the vegetable seller says.
The article is a translation of the original Arabic.
