Treasury estimates economic damage from Protective Edge at NIS 4.5 billion

Tax hikes possible, Tax Authority official says; tourism has been one of hardest-hit industries, losing an estimated $350 million.

By NIV ELIS
King David hotel in Jerusalem (photo credit: MARC ISRAEL SELLEM/THE JERUSALEM POST)
King David hotel in Jerusalem
(photo credit: MARC ISRAEL SELLEM/THE JERUSALEM POST)
The Finance Ministry estimated economic damage from Operation Protective Edge at slightly under 0.5 percent of GDP, a level similar to the 34-day Second Lebanon War in 2006.
“The cost of a month of fighting is NIS 4.5 billion, in terms of the loss in Gross Domestic Product,” Israel Tax Authority head Moshe Asher said in a Monday interview with Channel 10. “Furthermore, it seems that we will absorb a loss of NIS 1.5b. in tax revenues.”
While the ministry would work to avoid new taxes, he said, it was not certain it would be able to avoid them.
Though the running estimate for indirect damages to businesses ran at about NIS 750 million, Asher said he believed it would be closer to a billion.
Direct damages from rocket fire would cost another NIS 50m., he said, a number that the repair contractors union put forth as well. That’s a significant reduction from direct damages absorbed during the eight-day Pillar of Defense operation in 2012, which according to Calcalist stood at NIS 65m.
The direct damages are paid out by a compensation fund that is maintained separately from the state budget, and stands at around NIS 5.5b.
One of the hardest-hit areas has been tourism, which industry sources estimate lost $350m.
It is not yet clear how far into the future that damage will last, and whether tourists will start booking again if Monday’s ceasefire holds.
“It’s very dynamic, at this point we’ll see if things start to change,” a spokesman for the Israel Hotel Association said.
According to Globes, the tourism industry will have to lay off roughly 20 percent of its employees in the coming months.
In his Channel 10 interview, Asher also noted that Finance Minister Yair Lapid still intended to push through his controversial 0 VAT housing plan, despite its NIS 2m.-3m.-a-year price tag and criticism that it will be ineffective at bringing down home prices.
The bill was held up in the Finance Committee in July, but may come up again in October.