Finance Minister Yair Lapid and Knesset Finance Committee chairman Nissan
Slomiansky agreed on Wednesday to restructure planned tax increases for the
2013- 2014 budget – laying out a more progressive income tax scheme, scrapping
controversial tax hikes and slashing government spending.
successfully changed the tax map. In an unprecedented way, we canceled
difficult cuts and tax hikes that would have hurt the middle class and weaker
sectors,” Bayit Yehudi’s Slomiansky said following negotiations with Lapid and
Yesh Atid faction chairman MK Ofer Shelah.
Instead of increasing income
taxes 1.5 percent across-the-board as originally planned, the tax will rise only
1% for those earning under NIS 14,000 a month; remain at a 1.5% increase for
those making between NIS 14,000 and 21,000; and grow 2% for incomes over NIS
An unpopular tax that would affect housewives was eliminated, as
was a tax for homeowners seeking to buy new apartments.
Tax credits for
academics would also change, leaving one tax credit point for undergraduates and
a half-point for masters students a year after graduation.
allotments affecting kids born after 2003 would remain untouched.
order to maintain the planned budget deficit of 4.65% for 2013 and 3% for 2014,
however, other changes had to be made to offset the new plan’s fiscal
Every ministry’s budget would be slashed by a half-billion to a
billion shekels, and the Education Ministry and Transportation Ministry would
have their budget increases reduced by half a billion shekels.
addition, taxes on land purchases would rise to 6% from 5%, except for private
purchasers who complete building residences within three years. Taxes on public
companies’ dividends will increase by a half billion shekels.
moving around approximately NIS 3.5 billion however, the committee said more
changes would have to be made, as the new scheme still fell some NIS 1b. short
of the deficit target.
The finance committee began voting on the budget and the Economic Arrangement Bill’s many articles, including the new
changes, on Wednesday afternoon. The committee meeting continued until after
press time, with opposition MKs dragging out votes in an attempted
“We prevented harm to housewives and harm to the middle class
by changing income tax structure so only the biggest earners will be harmed. In
addition, we made the government seriously cut ministry budgets,” Slomiansky
The finance committee chairman called the changes an
“unprecedented achievement in light of the Finance Ministry’s aim to raise taxes
and cut services to the whole public. Now, together with the Finance Ministry,
we will examine ways to fix this, to close the deficit and reach fiscal goals,
while keeping financial stability and strength in the market and taking care of
the entire public.
“These agreements improve the budget. The steps we
agreed upon ease the burden on the weaker sectors and middle class while staying
within the budgetary framework and allowing growth in the coming years,” Shelah
MK Gila Gamliel (Likud Beytenu), the coalition coordinator in
the finance committee, said that “the new budget is undoubtedly different from
the original proposal.”
Referring to her threats to vote against parts of
the budget, Gamliel said, “At first, I was one of the few who refused to raise a
hand in favor [of the original budget plan], but this became the
Gamliel added that Finance Ministry bureaucrats clearly
understood that the budget could not be passed as they proposed it.
only am I happy they accepted my stance, I’m glad they understood the public
opinion of Israel’s citizens. We cannot pass a decree that the public
cannot withstand,” she stated, paraphrasing the Talmud in Tractate Bava
Construction and Housing Minister Uri Ariel praised the
cancellation of taxes on people buying homes.
“This was a bad tax for the
housing market, which I voted against in the government,” Ariel said.
said many times that it is logical to cancel the tax, which undermines steps to
lower housing prices. The government is totally committed to lowering housing
prices, and it proved this yet again.”
Knesset Committee for the
Advancement of Women chairwoman Aliza Lavie (Yesh Atid) praised the Finance
Ministry and the finance committee for canceling the tax on
“The topic of housewives is close to my heart,” Lavie
“In recent weeks, I learned it in depth in the Committee for
the Advancement of Women and presented a detailed position paper to the finance
minister, who showed great sensitivity on the topic and did all he could to try
not to hurt housewives.”
The opposition still found fault with the
budget, with Labor submitting 1,400 objections to it and another 50 to the
Economic Arrangements Bill on topics ranging from corporate tax to reform in
mental health services.
Opposition leader Shelly Yacimovich (Labor) said,
“Our battle and the public’s high level of involvement on these topics bore
fruit and Lapid had to bend and cancel tax increases, but Lapid and [Prime
Minister Binyamin] Netanyahu’s plan to put the burden on the middle class and
the poor while giant corporations enjoy exemptions still
According to Yacimovich, there is still a “harsh general
picture,” and the middle class and poor will still face tax hikes and budget
cuts that will make their lives more difficult.
Yacimovich brought as an
example Lily Ben-Ami, a teacher who ran in the Labor primary whose husband is an
engineer, and said they will have to pay annually NIS 2,400 more in income tax
and NIS 1,500 more due to the raise in VAT. Moreover, they will receive NIS
2,000 less in child allotments and lose NIS 600 in tax
Altogether, they will lose NIS 6,500 in the next
“This is a partial list. We didn’t talk about payments to their
children’s schools, which will increase, and that a longer school day will not
be implemented for five more years and more.
The Ben-Ami family is one of
hundreds of thousands of similar families,” Yacimovich said.
Arye Deri praised opposition parties for succeeding in their “joint, determined
battle that led the finance minister to fold and reduce cuts.”
called on Netanyahu and Lapid “to have mercy on the middle class and weaker
sectors and find alternatives to the cuts that are still a major blow to the
“The steps taken in the Finance Ministry prove yet again
that the Finance Ministry’s plans are not Godgiven [and can be changed],” he
MK Itzik Shmuli (Labor), one of the leaders of the 2011 housing
protests, said that despite the cancellation of the tax on homeowners buying new
houses, the budget is still cruel and will increase poverty.
“At least we
successfully neutralized some of the most unjust and bizarre parts [of the
budget],” he stated. “The finance minister woke up and understood that in a
difficult economic time, he cannot squeeze most Israelis in such a harsh
Meretz MK Ilan Gilon complained that Lapid made the public “walk
down the Via Dolorosa before reaching the obvious conclusions.”
government still avoided increasing spending on health, welfare and housing,”
“At the end of the day, the burden on the strongest people
still perpetuates an irresponsible economic system that will increase inequality