Demonstrators flocked to downtown Beirut throughout the day after civil society groups and a range of political parties called for mass mobilisation against the move.
Instead of taxing citizens more, the government should eliminate corruption and waste within its own institutions, the protesters said.
"You steal, we pay!" read one of the banners on Sunday, while another depicted a picture of Lebanon's cabinet with the caption: "The bandits of Lebanon".
Transparency International ranked Lebanon 136th out of 176 countries last year in its Corruption Perceptions Index, in which first place goes to the least corrupt.
"On top of everything else, this government wants to pass unconstitutional laws and taxes instead of finding the source of waste and corruption in the Lebanese state," said Alaa al-Sayegh, 29, in downtown Beirut on Sunday.
"They're paying for all this waste and corruption from the pockets of the Lebanese people," he added.
Camila Raad, the 32-year-old head of a teacher's union in the northern city of Tripoli, said she had travelled to the capital to show her "opposition to the government, which has starved the people".
- 'No food. No work' -
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"We have no food. No work. We're hungry... They want to increase taxes and we can't even pay for food," she said.
Lebanon's parliament last week began discussing a long-awaited salary increase for public servants, including teachers.
But when it emerged that parliamentarians were considering hiking taxes to pay for the raise, political figures and civil society groups were enraged.
"Tax evasion in Lebanon is valued at $4.2 billion. This amount is enough to fund multiple salary increases and plug a large part of the deficit," lawmaker Sami Gemayel, who heads the Kataeb (Phalange) political party, said earlier this week.
So far, parliament has proposed to increase value-added tax by one percent to a total of 11 percent, as well as hike taxes on tobacco, imported alcohol, and travel.
Protesters spent Sunday afternoon in the sunny square in front of Prime Minister Saad Hariri's offices in downtown Beirut, surrounded by Lebanese security forces.
Hariri made a brief appearance in front of the crowd, pledging to fight "corruption in the country".
But he retreated when protesters began tossing water bottles and shouting at him.
In 2015, civil society groups organised a wave of protests in downtown Beirut to demonstrate against the lack of basic services like water and electricity and rampant corruption.
The last time Lebanon's government agreed to a formal budget was 12 years ago.