Will Kahlon leave coalition because of expected tax increase?

The source close to Kahlon confirmed that Kulanu will not join the coalition if demands require a tax hike.

May 13, 2019 03:02
2 minute read.
Will Kahlon leave coalition because of expected tax increase?

Israeli Prime Minister Benjamin Netanyahu and his Finance Minister Moshe Kahlon attend a news conference announcing the appointment of the new Bank of Israel Governor, in Jerusalem, October 9, 2018. (photo credit: RONEN ZVULUN/REUTERS)


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Finance Minister Moshe Kahlon will not return to his role as finance minister if the Likud gives in to other potential coalition partners’ costly demands, a senior Kulanu source said on Sunday.

“He doesn’t want to be finance minister if there are commitments that he can’t keep,” the source said. “Kulanu won’t join the coalition until the other [parties] do and we can see what is in their agreements.”

The source close to Kahlon confirmed that Kulanu will not join the coalition if demands require a tax hike, though he would not put a number on how high the cost must be for him to go to the opposition.

Kahlon’s conditions come months after the Finance Ministry revealed a yawning gap in Israel’s fiscal deficit, which reached 3.5% of the GDP as of February, compared to the government’s target of 2.9%.

One reason experts cited for the gap was large tax rebates enacted on Kahlon’s watch, which were much higher than in the previous year.

Experts also predicted that the 2019 fiscal deficit would reach 4% of GDP, as a result of slowing growth and increasing expenditure. Among the ways for the yet-to-be-formed government to shrink that deficit would be to raise taxes and decrease spending.

Meanwhile, Likud negotiators have been trying to reduce the budgetary demands of their potential coalition partners, including UTJ’s call for a sharp increase in the Health Ministry budget; Shas and UTJ demanding a higher budget for yeshivas; and Union of Right-wing Parties (URP) seeking greater funding for settlements and religious-Zionist education.

Potential coalition partners have already agreed to implement the “Norwegian Law” – which allows ministers to resign from the Knesset and for the next person on the party’s list to take their place, but for the ministers to re-take their places in the Knesset and for the newer MKs to automatically be kicked out if the ministers leave the cabinet for any reason. As a result, there will be more salaries paid by the government’s coffers for new MKs and three aides each.

In addition, the number of cabinet ministers is expected to grow to as many as 26, costing the state hundreds of millions more for establishing new ministries and paying salaries.
Likud negotiators are still mediating between Yisrael Beytenu and the haredi parties the matters of religion and state.

The Likud offered to include an article in coalition agreements that says there will be no change in the status quo on such matters, to placate Yisrael Beytenu, which has sought to pass a haredi enlistment bill and fight added stringencies to the state conversion system, as well as haredi efforts to reduce public construction work on Shabbat.

An insider in the negotiations said that the same article was in the last coalition’s guidelines, but that the Likud is offering Yisrael Beytenu an opportunity to take credit for it this time, to show they are fighting demands from the haredi parties.

Yisrael Beytenu denied that they accepted the offer, and party leader Avigdor Liberman is expected to comment on it at a meeting of his faction in the Knesset on Monday.

With the first deadline for forming a coalition approaching this week, Prime Minister Benjamin Netanyahu plans to ask President Reuven Rivlin for a two-week extension on Monday, which would bring the final date for forming a government to May 29.

The Likud negotiating team has a meeting with URP set for Monday morning.

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