Knesset Finance Committee approves VAT increase

Yacimovich calls measure a "disgrace" after failing to block its passage.

May 28, 2013 01:23
1 minute read.
Labor party chairwoman Shelly Yacimovich

Labor party chairwoman Shelly Yacimovich 370. (photo credit: Marc Israel Sellem)

The Knesset Finance Committee on Monday approved Finance Minister Yair Lapid’s plan to increase the value added tax to 18%, as committee chairman Nissan Slomiansky (Bayit Yehudi) announced plans to seek a differentiated VAT in order to make the tax less regressive.

The committee approved the measure by a vote of 9 to 5, despite its unpopularity and fierce rhetoric in the committee, both from the opposition and the coalition.

Opposition leader Shelly Yacimovich (Labor) attempted to block or, at least, postpone the increase by imposing procedural hurdles to its passage in the Knesset, but the committee ultimately overruled her.

The government estimated that increasing VAT from its current 17% would net the state NIS 4.6b. in revenues, helping to bring the budget deficit to its new target of 4.65% for 2013.

Yacimovich called the VAT increase a “disgrace” implemented at a time when large corporations were enjoying big tax breaks.

“We recently learned that the four richest companies in the economy received NIS 4 billion in benefits. That’s exactly what you make by increasing VAT,” she said.

Labor MK Miki Rosenthal slammed the measure, claiming it was regressive and would increase inequality, and said the vote should be postponed until the overall budgetary picture was clearer.

Likud Beytenu MK Orly Levy-Abecassis even went so far as to say, “There are times I wish I were in the opposition,” while Hatnua MK Elazar Stern called it “professional negligence,” because the tax would be paid “primarily by the poor.”

Slomiansky agreed that a flat VAT rate was problematic, and promised to seek a way to put together a differentiated VAT, which may not affect the poor as heavily.

“I intend to establish a subcommittee to examine differentiated VAT, as is done in many countries around the world, including most of the OECD countries,” he said, promising that both coalition and opposition parties would be included in the committee.

Slomiansky also hit back at criticism from Shas and UTJ about the VAT rise, saying that during their time in the government coalition, they voted to increase VAT twice.

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