Industry seeks tax cuts in 2008 budget

First among the four main actions called for is a cut in company tax to 20% by 2010 instead of the planned reduction to 25% in 2008 from 27%.

The Manufacturers Association of Israel on Tuesday called upon the government to adopt tax cuts and budget intensive investment initiatives to support the traditional and export industries in order help the economy grow at a 6 percent rate over the next five years. "The main aim is to reach an average per capita income level in Israel that is comparative to the average levels in OECD countries," the Association said. "Today, Israel is ranked at number 22 among the OECD countries in terms of per capita income, which in turn means that the standard of living in Israel is 12% lower than the average among the OECD countries." Shraga Brosh, president of the Association, convened a special meeting, ahead of the start of government discussions on the 2008 state budget, which are expected to begin Sunday, following the appointment of the new Finance Minister by the end of this week. The actions recommended by the Association promise to lead to annual gross domestic product of 6% over the next five years and are expected to pull 40,000 people out of the unemployment cycle. First among the four main actions called for is a cut in company tax to 20% by 2010 instead of the planned reduction to 25% in 2008 from 27%. In addition, the group is demanding that the maximum income tax rate level for singles be reduced to 44% in 2008 and 40% in 2010 instead of 47% and 44%, respectively, as is planned. The second demand seeks a budget expansion to the Law for the Encouragement of Capital Market Investment, which would involve an additional budget of NIS 2 billion to respond to requests with a volume of NIS 10b., which had been in the pipeline for over a year. As a result of this budget allocation, 14,000 employed could be added to the work force, the group claimed. The Manufacturers are recommending an increase in the investment budget in 2008 from the NIS 130 million, currently allocated to NIS 600m. a year. Furthermore, the Association is urging the government to enlarge the Chief Scientist budget from NIS 1.2b. in 2007 to NIS 2b. in 2008, of which NIS 300m., should be allocated to support traditional industry. It also is asking the government to set aside NIS 460m. to assist the export industry, which has been damaged by a strong shekel. Separately, the Federation of Israeli Chambers of Commerce, announced last week, that the Federation of Israeli Economic Organizations will present its own set of recommendations for the budget. Dr. David Klein, former governor of the Bank of Israel, is heading the economic committee of the federation for the recommendations to the budget, which will aim to secure the continuation of GDP growth levels of 5% to 6%.