Tax hike, budget cuts to pass despite opposition

Shas fiercely criticizes plan as regressive, but its leaders admit that they have no chance of blocking it in cabinet.

Netanyahu Steinitz 390 (photo credit: Reuters)
Netanyahu Steinitz 390
(photo credit: Reuters)
Prime Minister Binyamin Netanyahu is not expected to have a problem getting cabinet approval for his plan to raise taxes and cut the budgets of government ministries, despite a public outcry over the proposals on Wednesday.
The cabinet will convene to vote on the plan on Monday instead of Sunday due to the observance of the Tisha Be’av fast. Shas fiercely criticized the plan, but its leaders admitted that they had no chance of blocking it, because 15 of the 29 ministers are from Likud and not one Likud minister has announced opposition to it.
Shas leader and Interior Minister Eli Yishai came out against Netanyahu’s planned increase to the value-added tax, saying the regressive tax hurt weak sectors of society.
“I think we need a progressive tax, so the rich pay more and the poor pay less,” Yishai said in an interview with Army Radio. “It can’t be that a middle-class person pays exactly what a rich person pays.”
Items like luxury cars, jewelry, restaurants and hotel rooms, which the rich are more likely to purchase, should be taxed at a higher rate than water, electricity, bread and life-saving medicine, he said.
Proposed budget cuts, the minister continued, involve the same problem, hitting the weakest sectors of society by taking away vital support and services. The funds are not coming off ministers’ salaries, he noted.
Foreign Minister Avigdor Liberman (Yisrael Beytenu) also criticized Netanyahu’s initiative. He expressed frustration that he had not been consulted about the move prior to Tuesday’s announcement, but said he was waiting to see the final proposal before instructing his ministers how to vote.
Habayit Hayehudi leader and Science and Technology Minister Daniel Herschkowitz said he would also wait until he saw the proposal on Monday before making a decision, adding that the nine days culminating in the observance of Tisha Be’av are an inauspicious time for making key decisions.
The prime minister, at a working meeting in his office on the new economic steps that will come before the cabinet on Monday, explained that “managing the national economy is like managing a household.
You must balance expenses and income, you cannot spend on everything, you must choose.”
He said that major projects the country has undertaken over the last year – such as building a fence along the Egyptian border to stop the flow of infiltrators, upgrading the country’s firefighting capabilities and dealing with the changing security situation in the region – cost money.
Netanyahu said that on Monday, the cabinet would prioritize where the country’s money should be spent, while maintaining a balanced budget and not exceeding it.
The prime minister also said the government would ensure the “general framework of revenues, because that is the way we preserve the Israeli economy, unlike what is happening in Europe and in other places in the world.”
According to Netanyahu, the employment rate in Israel is greater than in almost any other Western country.
“We do not want hundreds of thousands of unemployed, we want Israelis to work and earn a living, and that is what we are doing with a responsible policy, as will be expressed by the cabinet next Monday,” he said.
Finance Minister Yuval Steinitz said at the meeting that Israel had successfully staved off the global economic crisis for three years.
“We have succeeded in preserving the Israeli economy and Israeli citizens from the catastrophe that we see in America, Europe and other places,” he said. “In order to continue doing so, we need to maintain budgetary and economic responsibility.”
Steinitz said the government would “submit a series of steps that will increase state revenues by billions of shekels, some immediately and some in 2013.”
He said the steps were critical to maintaining the confidence of the international community, credit rating companies and investors.
The finance minister said that the steps to be brought to the cabinet on Monday represent “the line of defense for the Israeli economy and the citizens of Israel.”
“Whoever suggests otherwise, whoever proposes that we declare that we will not meet the deficit target [now at 3 percent], suggests Spain or Greece,” he said. “One should see what is happening in Spain or Greece and understand that whoever refuses to increase state revenues and maintain budgetary and economic responsibility, brings Israeli citizens closer to what is happening in Greece, Spain, Italy and other places.”