Gov’t sets deadline to finalize state budge

Bank of Israel: Next year’s budget must include significant expenditure cut; Sept 13 set for budget deadline.

PM Netanyahu, Finance Minister Steinitz 370 (photo credit: Sebastian Scheiner/Reuters)
PM Netanyahu, Finance Minister Steinitz 370
(photo credit: Sebastian Scheiner/Reuters)
September 13 will be the date the government completes deliberations over next year’s state budget, under a timetable released by Prime Minister Binyamin Netanyahu and Finance Minister Yuval Steinitz.
The cabinet will hold its first budget debate at its weekly meeting on September 2. The multi-year defense budget will be the subject of a separate dialogue on August 15.
Income tax will rise for the second- and third-highest brackets on January 1, after the Knesset approved the government’s multi-billion shekel tax hike package Monday. Income will be charged as follows: less than NIS 5,200 per month – 10 percent; NIS 5,201-8,880 – 14%; NIS 8,881-NIS 14,000 – 21%; NIS 14,001-20,000 – 31%; NIS 20,001-41,830 – 34%; NIS 41,830 and above – 48%.
All income above NIS 67,000 per month will be charged a 2% surtax. According to the Israel Tax Authority, Israelis earning a salary of NIS 15,000 per month can expect to pay additional income tax of NIS 49 per month once the changes come into effect next year.
Taking tax credits into account, men with no children will be taxed NIS 1,937 per month; men with one child under the age of three will be charged NIS 1,507; women with two children (one of them under five) will pay NIS 1,184; women with no children will pay NIS 1,829; women with three children over 5 will pay NIS 1,184; and women with three children (two under five) will pay NIS 754.
Israelis earning NIS 20,000 per month will be taxed an extra NIS 99; those earning NIS 40,000 per month will be taxed an extra NIS 352; and the lucky few who earn NIS 100,000 will pay an extra NIS 1,037.
Those earning NIS 14,000 per month or less will be taxed at the same rate as this year.
Finance Minister Yuval Steinitz told Army Radio Tuesday that NIS 700 million in expenditure cuts approved by the Knesset for the remainder of 2012 will be the last spending cuts the government implements this year.
Meanwhile, the Bank of Israel has said that next year’s budget must include a significant expenditure cut in order to avoid exceeding the spending limit set by law. The law enables real expenditure to increase by 5%, but this target is under threat given the high cost of multi-year plans adopted by the government, the bank warned in its Monetary Policy Report on the first half of 2012.
“The expansion of budget commitments in 2013 and the slowing growth rate in 2012 will make it difficult for the government to meet its deficit targets for the next two years,” the report said.
The central bank further warned that if indicators of an expected slowdown in economic activity remain at current levels, its research department will likely revise 2013 growth and inflation forecasts downward when it next publishes forecasts in September.
Based on the staff forecast formulated at the end of June, the research department estimates the rate of growth in GDP will total 3.1% in 2012.