Treasury proposes 1.5% income tax hike in budget

Finance Ministry says measures include historic spending cut.

Lapid at faction meeting 370 (photo credit: Marc Israel Sellem/The Jerusalem Post)
Lapid at faction meeting 370
(photo credit: Marc Israel Sellem/The Jerusalem Post)
The Finance Ministry has released the draft state budget and the Economic Arrangements bill for 2013 -2014. The measures include what the ministry itself calls the biggest spending cut ever imposed.
Among the main steps are a 1.5% rise in income tax for all tax brackets; a 1% rise in VAT to 18%; and the imposition of national insurance payments and health tax on non-working women. The rise in income tax is expected to bring in over NIS 4 billion and the rise in VAT a similar amount.
Other proposals are higher taxes on luxury goods, and abolition of the VAT exemption for tourism services.
On the spending side, a 1% reduction in civil service staff is planned, and a hiring freeze until the end of 2015. Child allowance will be cut to NIS 104 per month for each child, and the state will cease to subsidize after-school care for children nine years of age and over. Five Israeli missions overseas will be closed, and overseas trips by ministers will be cut back. Several magistrates courts will be closed.
The budget proposals will be discussed by the government next week.
Separately, the price of electricity is to rise 5.5%. The rise is more moderate than expected because of the commencement of the supply of gas from the Tamar field.
Opposition leader Shelly Yacimovich on Tuesday criticized Finance Minister Yair Lapid for the draft budget, saying the proposed cuts represent "cruelty, backstabbing the public and mainly a bitter economic mistake which does not bring a single shred of good news."
The Labor leader called the plan one of "depression and hard hits and not a growth plan."
She stated that Lapid was continuing the mistake which had led to the budget deficit, failing to sufficiently tax "big capital."
Yacimovich slammed Lapid for contradicting his campaign rhetoric which slammed "the old politicians" for raising taxes on the middle class.
Hadash MK Dov Henin referred to the draft budget as "a war budget, against the people," and suggested that it was likely to bring about the reemergence of the social justice protest movement.
Henin stated that "instead of giving natural resources back to the people, instead of obligating tycoons to pay a fair tax rate, instead of cutting the costs of occupation and settlements, the government prefers to cut stipends for children, public services and workers' rights."
He added that the government "may think that the social justice protest movement is behind us, but they will be surprised to find it in front of them."