Budgetary woes take turn for the better: Deficit drops to 4% of GDP

Big-ticket business deals, such as Warren Buffet's purchase of Iscar, increase state's revenues, dropping deficit.

July 7, 2013 13:02
1 minute read.
Yair Lapid at cabinet meeting, 20 May 2013.

Yair Lapid at Cabinet Meeting, looking official 370. (photo credit: Marc Israel Sellem/The Jerusalem Post)

The nation’s budgetary woes took a turn for the better, according to Sunday’s monthly budget calculation from the Finance Ministry, as the 12-month deficit dropped to 4 percent of GDP, well below the 4.6% target set for the year.

Earlier in the year, the 12-month deficit had reached 4.5% but started dropping as the state began collecting more revenue from big-ticket business deals, such as Warren Buffett’s purchase of Iscar in May.

In the first six months of the year, the Treasury paid out NIS 10.3 billion more than it took in, a decrease from the NIS 11.1b. deficit in the same period of 2012. When the overall 2012 deficit exploded to 4.2% of GDP, well over the 3% target set for that year, the nation’s finances became a central issue in the January election.

Since then, Finance Minister Yair Lapid set out a program of budget cuts and tax increases to bring the deficit in line. While Lapid put the 2014 deficit target at 3%, he raised the 2013 target to a hefty 4.6%, saying there was limited wiggle room to adjust the nation’s finances before the end of the calendar year. Some tax increases, however, such as VAT and taxes on beer, cigarettes and hard alcohol, came into effect in recent weeks and months.

The government has operated on a monthly version of the 2012 budget and will continue to do so until the financial plan for 2013-2014 passes in the Knesset. The budget must be approved by the end of July, otherwise new elections will be called automatically.

A Yesh Atid-sponsored electoral reform bill being considered in the Knesset would cancel the law requiring new elections if a budget fails to pass.

Also on Sunday, members of the Knesset Finance Committee expressed marked opposition to a proposed tax on “housing improvements,” levied on non-first-time home buyers.

Representatives from the Construction and Housing Ministry sparred with Treasury officials, arguing that the tax would hurt the real-estate market by making it more expensive. The Treasury officials said the state needed the expected NIS 1.05b. in annual revenues to meet deficit goals, arguing that the tax was designed to primarily affect the affluent and would only be in place until 2015.

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