From fuel to VAT: Breaking down the rise in retail prices

Report by Lara El Hachem, English adaptation by Mariella Succar

When consumers pay for a loaf of bread, they often assume the price reflects only the product itself. However, the final cost includes a chain of expenses, which explains why a 300,000 LBP increase in gasoline prices can affect food prices.

The process begins at the port. A crane unloads the container from the ship, after which a truck transports the goods for inspection. Another truck then moves the goods from customs to the importer’s warehouse, and a further truck delivers them from the warehouse to the supermarket.

Each stage of this process requires fuel, even before consumers use their own vehicles to purchase the goods. While this logistical chain may appear extensive, its fuel-related cost is not considered the most significant concern for importers.

Importers are more concerned about the increase in value-added tax (VAT) from 11% to 12%. VAT applies not only to a wide range of goods but also to many of the services involved in bringing products to consumers — commonly referred to as operating expenses. As a result, VAT can be applied cumulatively across multiple stages of the supply chain.

Operating expenses include the various service and transportation costs incurred in delivering goods from the port to retail outlets, all of which become subject to VAT.