The 2013 budget will include tax hikes, Finance Minister Yuval Steinitz declared
Wednesday, just one day after agreeing to double next year’s budget deficit
ceiling to 3 percent of the gross domestic product.
Responding to media
reports that the increased deficit target would preclude a tax hike, Steinitz
said, “I want to set the record straight: Taxes will be imposed.... I must say
this, because our credibility is important to us and [taxation] is a central
tool of this government’s policy, particularly in an hour of
Steinitz made the comments while addressing the Israel Democracy
Institute’s 20th Caesarea Forum at the Dead Sea. The annual event was renamed
this year to the Eli Hurvitz Conference on Economy and Society, in memory of the
former Teva Pharmaceuticals chairman and CEO who died last year.
Tuesday, Steinitz and Prime Minister Binyamin Netanyahu announced their decision
to increase the 2013 deficit target from 1.5% to 3% – or almost NIS 30
The two also agreed to set new long-term deficit targets –
lowering the deficit to 2% by 2016 and 1.5% by 2019 – and to maintain their
original goal of lowering debt-to- GDP ratio to around 60% by
Steinitz explained at Wednesday’s conference that he and Netanyahu
were guided by two equally important factors in making their decision: their
desire to reduce the general public’s tax burden as much as possible and their
intention not to increase the deficit to unreasonable proportions. He also said
that OECD Secretary- General Angel Gurría advised him on the matter during his
visit to Israel three weeks ago.
The 2013 budget will be a single-year
budget only, in accordance with the government’s policy of producing biennial
budgets except for during election years. On Sunday, the cabinet backed Steinitz’s proposal to
introduce legislation committing future governments to adhere to the biennial
On Wednesday, the Knesset Research and Information Center
released a report outlining the pros and cons of maintaining the two-year
The Knesset Finance Committee commissioned the study.
report said that the biennial format would help ensure budgetary stability
during political crisis, aid government ministries in conducting long-term
planning, instill feelings of certainty in market players, enable long-term
allocation of planning and management resources, build trust in the business
sector and foreign investors and allow for streamlining of infrastructure
On the other hand, the report said, the main problem with a
two-year budget is that it increases the difficulty of adapting to changes in
the global and domestic economic environment. It added that this also increases
the likelihood of making inaccurate forecasts on growth, revenue and expenditure
– particularly in the budget’s second year.