The 2013 budget will not contain a large tax hike, Prime Minister Binyamin Netanyahu intimated Tuesday, saying what has worked until now would continue to work in the future.

Netanyahu spoke at a press conference at his Jerusalem office alongside Finance Minister Yuval Steinitz and visiting Organization of Economic Cooperation and Development Secretary-General Angel Gurria.

Media reports have suggested that next year’s budget will include largescale spending cuts and increases to the value-added tax (16 percent to 17%) and corporate tax. The Treasury released data Tuesday showing a NIS 18.4 billion budget deficit since the start of 2012. It blamed this mainly on a NIS 11.3b. shortfall in tax revenues.

“There is no conflict between managing a free economy and social justice,” Netanyahu said. Israel has produced strong growth and reduced poverty and unemployment in the face of global troubles due to the government’s policy of limiting expenditure and not raising taxes, he said.

The government would continue to focus on breaking up cartels and monopolies, encouraging people to enter the workforce and enabling them “to benefit from having more money in their pockets,” Netanyahu said. Raising taxes excessively would be counterproductive, he said, because it would discourage people from working.

Steinitz said budget preparations would continue for several more weeks. He warned that the government faced a choice between responding to some public demands without breaking the budget or answering to every need and exposing the country to the risk of becoming the next Greece, Spain, Portugal or Ireland.

Gurria complimented the government for its responsible economic management and for achieving impressive results in the areas of growth, employment, inflation and debt-to-GDP ratio. He warned against drastic tax hikes, saying Israel can improve its long-term economic situation by introducing public- service and workplace reforms, improving the education system and dealing with over-concentration.

Opposition leader Shelly Yechimovich accused Netanyahu of being detached from reality, saying OECD data show that Israel suffers from one of the highest rates of poverty and inequality in the world.

“Netanyahu boasts about growth statistics but forgets to mention that this goes into the hands of the richest thousandth only,” she said in a press statement. “His intention to introduce budget cuts adds insult to injury and will force the middle class to once again fund from its own pockets services that the state should supply.”

Meretz leader Zehava Gal-On said it was “outrageous” that Netanyahu holds such an “archaic” economic mind-set at a time when his policies only serve to expand income inequality. He is planning to grant billions of shekels in tax exemptions to large companies and raise the VAT, she said, when he should instead lower tax rates for smaller businesses and increase them for the largest.

Meanwhile, Vice Premier Shaul Mofaz said during a meeting with the Federation of Israeli Economic Organizations that Netanyahu and Steinitz must consult with employers and workers before making any decision on the 2013 budget.

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