March of the million Jerusalem 311.
(photo credit: Marc Israel Sellem)
One of the central issues in dealing with the numerous demands of the social
demonstrators is the cost of fulfilling them. There are basically two potential
sources of money to cover the expense: one is to take the money from other items
in the budget, and the other is to turn to new sources of untapped
One of the stipulations of the Trachtenberg team’s terms of
reference was that there should be no deviations from the budget framework. This
requires that every proposal made by the Trachtenberg panel regarding new
expenditure be accompanied by a proposal as to what item in the current budget
should be cut.
On the ideological level, this is simple. Left-wing,
secular peaceniks will say that the cuts should be made in the budgets earmarked
for the settlements in Judea and Samaria, and from welfare payments made to
haredim who do not serve in the IDF and choose not to work. Radical
right-wingers will recommend cuts in the budgets earmarked for the country’s
Arab citizens who refuse to do national service and to swear allegiance to the
Extreme neo-liberals will recommend cuts in all welfare
payments, and that the government should privatize whatever can be privatized
while cutting the budget for social services.
In our complicated
socio-political reality, the realization of most of these proposals is not
feasible, and in some cases realizing them would actually cost much more than
what would be saved, at least in the short run. For example, stopping
investments in the territories, especially if this is part of a political
process involving the dismantling of settlements, will certainly result in vast
expenditures on the relocation of settlers. Therefore, irrespective of one’s
ideological priorities, an immediate major change in priorities is neither
realistic, nor a solution to the problem of where the money to realize the
“social justice” demonstrators’ demands will come from.
THOSE WHO speak
about creating new sources of income usually mention raising taxes (such as the
companies’ tax) or creating taxes that currently do not exist (such as an
inheritance tax). However, another source that is usually not mentioned – or if
it is, is mentioned only fleetingly – is an attack on the black market (or
shadow) economy – in other words, unregistered economic activity, on the income
from which no taxes or levies are collected.
A black market economy
exists in all states.
According to a study published last year on behalf
of the World Bank, the black market economy in Israel was estimated in 2010 at
21.9% of its GDP (its GDP in 2010 was NIS 813.6 billion, so the black economy
last year was around NIS 178b.).
This percentage has remained pretty
stable in the last decade. Out of 162 states examined in the World Bank study,
Israel is in 35th place, with most OECD countries (the main exceptions being
Belgium, Portugal, Spain, Italy and Greece) having smaller black economies. In
Switzerland and the United States, the black economy is estimated at only 8.6%
From time to time, the Israeli tax authorities, accompanied by
policemen, carry out unannounced tax collection operations in pre-selected
locations, which reveal businesses that fail to report to the authorities
altogether, or submit false reports.
The problem is that this activity is
sporadic and almost invariably reaches “small fry.” Occasionally we hear of
popular singers (usually of the so-called Mediterranean genre) having their
account books examined and being found to have failed to report their incomes
fully. Tycoons are hardly ever earmarked for such investigations.
problem with trying to uncover and tax unreported income is that much of the
black market economy is based on illegal activities, such as women trafficing,
illegal gambling, lending at exorbitant interest rates, trade in stolen goods,
etc. Taxing income from such activities is unthinkable, since this would involve
We do not know what percentage of the unreported
income results from activities that are á priori legal, but we are probably
speaking of tens of billions of shekels’ worth every year, spread among all
sections of the population. To tap into this money is no simply matter, and
could involve spending hundreds of millions of shekels on additional manpower
and organization (the manpower requirements include more undercover
investigators, professional tax collecting staff, and policemen). The government
would have to decide that the battle against the black market economy was indeed
a cause worth investing in.
The advantage of such action is that it is
not controversial from an ideological point of view, even though those who stand
to lose from it will certainly resist. It is highly recommended that the leaders
of the protest adopt this option into their agenda.The writer is a
member of the Labor Party, and is currently engaged in research and lecturing on
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