Netanyahu, OECD head.
(photo credit: GPO)
The 2013 budget will not contain a large tax hike, Prime Minister Binyamin
Netanyahu intimated Tuesday, saying what has worked until now would continue to
work in the future.
Netanyahu spoke at a press conference at his
Jerusalem office alongside Finance Minister Yuval Steinitz and visiting
Organization of Economic Cooperation and Development Secretary-General Angel
Media reports have suggested that next year’s budget will include
largescale spending cuts and increases to the value-added tax (16 percent to
17%) and corporate tax. The Treasury released data Tuesday showing a NIS 18.4
billion budget deficit since the start of 2012. It blamed this mainly on a NIS
11.3b. shortfall in tax revenues.
“There is no conflict between managing
a free economy and social justice,” Netanyahu said. Israel has produced strong
growth and reduced poverty and unemployment in the face of global troubles due
to the government’s policy of limiting expenditure and not raising taxes, he
The government would continue to focus on breaking up cartels and
monopolies, encouraging people to enter the workforce and enabling them “to
benefit from having more money in their pockets,” Netanyahu said. Raising taxes
excessively would be counterproductive, he said, because it would discourage
people from working.
Steinitz said budget preparations would continue for
several more weeks. He warned that the government faced a choice between
responding to some public demands without breaking the budget or answering to
every need and exposing the country to the risk of becoming the next Greece,
Spain, Portugal or Ireland.
Gurria complimented the government for its
responsible economic management and for achieving impressive results in the
areas of growth, employment, inflation and debt-to-GDP ratio. He warned against
drastic tax hikes, saying Israel can improve its long-term economic situation by
introducing public- service and workplace reforms, improving the education
system and dealing with over-concentration.
Opposition leader Shelly
Yechimovich accused Netanyahu of being detached from reality, saying OECD data
show that Israel suffers from one of the highest rates of poverty and inequality
in the world.
“Netanyahu boasts about growth statistics but forgets to
mention that this goes into the hands of the richest thousandth only,” she said
in a press statement. “His intention to introduce budget cuts adds insult to
injury and will force the middle class to once again fund from its own pockets
services that the state should supply.”
Meretz leader Zehava Gal-On said
it was “outrageous” that Netanyahu holds such an “archaic” economic mind-set at
a time when his policies only serve to expand income inequality. He is planning
to grant billions of shekels in tax exemptions to large companies and raise the
VAT, she said, when he should instead lower tax rates for smaller businesses and
increase them for the largest.
Meanwhile, Vice Premier Shaul Mofaz said
during a meeting with the Federation of Israeli Economic Organizations that
Netanyahu and Steinitz must consult with employers and workers before making any
decision on the 2013 budget.