In good news for Lapid, deficit shrinks to 3.8%

Down from a peak of 4.65% in February, the fall in the deficit stems mostly from higher taxes.

By
August 7, 2013 13:31
1 minute read.
Finance Minister Yair Lapid

Finance Minister Yair Lapid 370. (photo credit: REUTERS)

 
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The deficit in the 12 months ending in July continued a downward trend, coming out at NIS 36.4 billion, or 3.8 percent of GDP, the Finance Ministry announced Wednesday.

Down from a peak of 4.65% in February, the shrinking deficit will be welcome news for Finance Minister Yair Lapid; his good showing in the January election followed outrage over the swollen 2012 deficit, which at 4.2% was over double its original target.

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The fall in the deficit stems mostly from higher taxes. Because no budget had been passed yet, spending through July was automatically set on a monthly basis to mimic the 2012 budget.

Alongside higher income taxes approved the previous year, which went into effect at the start of 2013, recent increases in value-added tax and taxes on products such as cigarettes, beer and alcohol contributed to NIS 10.5b. more in tax revenues from January through July than in the same period the previous year.

The budget Lapid passed in the last days of July, which will determine spending in the last five months of the year, set the deficit target for the year at 4.65% – significantly higher than the current estimates – with a goal of shrinking it to 3% in 2014.

Separate reports issued by the Finance Ministry on Wednesday assessed that in 2011, the state forwent NIS 3.3b. in VAT revenues due to exemptions for fruit and vegetables (NIS 2b.), tourists (NIS 700m.) and Eilat (NIS 600m.). The Treasury also brought in NIS 17.5b from gasoline taxes in 2012.

Though the tax on gasoline increased in nominal terms, it grew less slowly than overall prices, while the proportion of gas taxes to GDP remained stable.

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