Despite increases direct and indirect taxes to bring the budget deficit for 2013 and 2014 down, planned spending for multi-year project mean taxes may have to rise again in 2015, the Bank of Israel revealed on Sunday.
Even if it brings spending in line with the legally mandated limit, a limit Finance Minister Yair Lapid carved out an exception for in 2013's budget, spending would still be too high to bring down the deficit to its target levels. "In the event that growth will not be particularly high," the report said, "there will be a need to raise additional tax revenue in order to meet the deficit target in the years 2015 and 2016."
Without the NIS 18 billion spending reduction and NIS 15b tax increase in the budget approved by the government in May, the report said, the deficit would have climbed to 6% of GDP and put Israel's debt on the trajectory to reach 100% of GDP by the end of the decade. Such a high debt ratio would endanger its financial stability and make interest payments all the more burdensome.