HOW TO SAVE $182 BILLION US DOLLARS

In this blog, we shall comment in turn on each one of the three initiatives that are mentioned in the above graphs. In other words, we shall explain why we strongly believe that the Public Authorities in Lebanon are in a position to reduce the public deficit during the next twenty years by some $188 billion US dollars, provided the right corrective measures and the necessary reforms are introduced and implemented.

As shown on the above" donut" illustration, each initiative will tackle a specific aspect of the Reform process. In the blue chunk the object will be to review the entire evaluation system of real estate properties for the purpose of assessing the six per cent Real Estate Registration fees (R.E.R.F.).

PART ONE -THE BLUE CHUNK OF THE DONUT
 THE REAL ESTATE REGISTRATION FEES

INITIATIVE ONE- SAVING $34 BILLION OVER TWENTY YEARS IN REAL ESTATE REGISTRATION FEES

We should correctly assess the properties prior to computing the 6% registration fees, if we wish to save $1.7 billion dollars a year or $34 billion dollars in twenty years

A,- A VINDICATION OF OUR ASSERTION: THE ASSESSMENT OF THE REAL ESTATE REGISTRATION FEES THAT WE OUGHT TO HAVE  COLLECTED IN 2013
To vindicate our assertion, we have taken as an example the registration fees raised in 2013 as per the MOF report and we have attempted to compare that figure with what we believe ought to have been collected instead.

For the purpose of our calculations, we have assumed that, on average, 16 million square meters will keep on being built in Lebanon, as has been the case, on average, during the previous five years (see the reports of the syndicate of Architects for these years).

 We have also assumed that the average market value per square meter will stand around $1,700, as is the case presently (see the article in the Daily Star of the 23rd October 2014 referred to below). Based on these assumptions the total value of real estate properties built in 2013 would have amounted to:

16,000 M2 x $1,700 = $27,200,000,000 and the 6% real estate registration fee would have been$27,200,000,000 x 6% = $1,632,000,000

B.- THE TOTAL AMOUNT OF REAL ESTATE REGISTRATION FEES THAT WERE EFFECTIVELY COLLECTED AND RECORDED IN 2013 (as per the MOF report for that year)

This amount appears in the records of the Ministry of Finance as LP 847 million Lebanese Pound, or. US$564,666

C.-  THE RESULTING SHORTFALL IN 2013

If we deduct from $1,632,000,000 the amount of RERF revenue recorded in the 2013 fiscal accounts or $564,666 we would have a SHORTFALL of $1,631,435,334.

Remarks:

1. The assumed average value of $1700 per square meter that we have adopted in the above example is vindicated in an article written in the Daily Star of the 23^rd October 2014, in which the following is mentioned: “According to a recent study by RAMCO real estate advisers, the starting asking price of an apartment under construction in Beirut varies from $1,925 to $7,647 per square meter”. 

2. For the purpose of this exercise, we have adopted the price of $1,700 per square meter which is even lower than the minimum price quoted by RAMCO. See http://www.dailystar.com.lb/Business/Lebanon/2014/Mar-17/250434-real-estate-demand-shifts-to-suburbs.ashx#axzz3GxzlBcZA

3. We assume in our conclusion, though our assumptions ought to be vindicated by some serious investigations into the matter, that the estimated value of the properties has been constantly highly understated by the commissions entrusted with the evaluation of the properties.

4. We recommend a full review of the entire process by an independent commission appointed for this purpose whose report must be subsequently published in the press, for all the citizens to see.

5. It is worthwhile mentioning that the above estimates do not take into consideration the fact that the real estate registration fees are due whenever a property is sold by the owner to another party. In such a case our estimated revenue would be much higher. All these factors call for greater transparency and an official obligation to publish, in future, all real estate transactions in order to keep the transactions as transparent as possible.

6. Furthermore the registration of all the properties in Lebanon ought to be made compulsory. The Finance Parliamentary Commission should be requested to draw up such a Law and get it voted upon by Parliament as soon as possible.