Tel aviv budget protest crowd 370.
(photo credit: Camilla Schick)
In the run-up to Wednesday’s 45-39 Knesset vote finalizing a Sunday increase in
the value-added tax from 17 percent to 18%, opposition leader Shelly Yacimovich
published a list of alternative measures, while Meretz leader Zehava Gal-On and
former Finance Committee chairman Moshe Gafni presented an alternative economic
Yacimovich’s alternatives included reducing tax breaks for big
companies, expediting taxes on natural resources, raising income taxes for the
top 1% and collecting trapped profits.
“[Finance Minister Yair] Lapid’s
[tax] sources hit the middle class and the poor, further reducing purchase
power, hurting small and medium businesses, leading to an economic slowdown and
recession,” Yacimovich said, urging the Knesset to vote down the “cowardly” increase.
According to Yacimovich’s estimates,
reducing corporate tax breaks and restructuring their tax obligations could save
NIS 3 billion and NIS 2b. respectively, natural resource taxes could bring in
NIS 1.6b., high-earner income tax could net the government NIS 1.7b., trapped
profits could raise NIS 3b., and higher capital gains tax could lead to NIS
Meanwhile, Gal-On accused Lapid of “laziness,” saying he took the
easy path instead of “confronting tycoons and pressure groups.”
she and Gafni had put together had NIS 40b. “in the places [Lapid] didn’t dare
to touch.” Their plan covered much of same territory as Yacimovich’s, but also
suggested adding two new tax brackets, creating a differentiated VAT (which
would assign different VAT rates for different products), a differentiated
corporate tax of up to 30%, and taxing vacant dwellings, also known as ghost
It reached its higher savings estimate in part by more
aggressively pursuing the same policies as Yacimovich, such as NIS 5b.
reduced corporate tax breaks compared to Yacimovich’s NIS 3b.
have come to change the evil of the decree, we are voting in favor of an
alternative,” Meretz MK Ilan Gilon said ahead of the vote, comparing the VAT
increase to stealing wallets from the helpless.
If that were not enough
for Lapid to choose from, the Macro Center for Political Economics (MCPE)
published another alternative on Wednesday. Former Bank of Israel governor David
Klein, who worked on the proposal, chastised Lapid for creating a budget that
“formulated only quantitative targets for covering the deficit at the expense of
other goals, especially social policies.”
The MCPE, too, recommended a
differentiated VAT and a more progressive income tax.
Another group of
experts, including academics from Tel Aviv University, the Hebrew University and
the National Union of Israeli Students, sent Lapid a letter arguing that
alternative measures would be more progressive and better for the
Knesset Finance Committee chairman Nissan Slomiansky, who
promised this week to create a subcommittee on differentiated VAT, said the
increase would raise NIS 400 million in revenues a month.
Finance Ministry refused to respond to the suggestions, Lapid had previously
addressed several of the ideas on offer. While agreeing that corporate tax
breaks were excessive, he argued that the state could not go back on existing
agreements, and that the law could only be reformed going forward in order to
maintain Israel’s credibility with businesses. He agreed that the question of
how to tax Israel’s natural resources was worth reexamining.
overreliance on raising income tax on the rich would lead to “socialism,” Lapid
has argued, calling it a failed policy.
He also argued that it was
important for Israel to maintain a good business environment, which requires
striking a balance on capital gains and corporate taxes.
asked: “Does someone believe the finance minister that in another year it will
be better? From where? From donations?” Having postponed a planned trip to an
OECD meeting in Paris over disagreements about the equality of service bill,
Lapid departed belatedly Wednesday to meet with the French finance
In reaction to the postponement, Gafni had charged: “He
canceled because he had to be part of the equality of service decision. It’s
more important for him to be part of a press conference.TheMarker
he’s going for a private vacation abroad.
People will pay VAT and the
finance minister doesn’t go to the conference, but is going on a private