PM's planned tax hike, budget cuts draw criticism

Labor leader Shelly Yechimovich says Netanyahu's billions of shekels in cuts will "bring the middle class to its knees."

Labor leader Shelly Yechimovich 370 (R) (photo credit: Marc Israel Sellem)
Labor leader Shelly Yechimovich 370 (R)
(photo credit: Marc Israel Sellem)
Politicians from across the political spectrum on Wednesday criticized Prime Minister Binyamin Netanyahu's announcement Tuesday night that he would be raising the value added tax (VAT) one percent and making wide-ranging budget cuts.
Labor leader Shelly Yechimovich in an interview with Army Radio on Wednesday attacked Netanyahu, stating "why did you take from the poor what you could take from the rich?"
Yechimovich added that the overall effect of the expected billions of shekels of cuts would be "to bring the middle class to its knees," according to the report.
The Labor leader said that the cuts would mean "less health, less education, internal security. This means that the average citizen will need to pay out of his pocket [even more] for what he is meant to be receiving for having paid his taxes," the report said.
Interior Minister Eli Yishai also came out against the planned tax increase on Wednesday, saying the regressive tax hurt weak sectors of society.
"I think we need a progressive tax, so the rich pay more and the poor pay less," Yishai said in an interview with Army Radio. "It can't be that a middle class person pays exactly what a rich person pays."
Items like luxury cars, jewelry, restaurants and hotel rooms, more likely to be purchased by the rich, should be taxed at a higher rate instead, Yishai said.
Proposed budget cuts, the minister continued, have the same problem, hitting the weakest sectors of societies by taking away vital support and services. The funds, he noted, are not coming off ministers' salaries.
Opposition leader MK Shaul Mofaz (Kadima) on Tuesday said Netanyahu was killing the middle class, adding that “after turning his back on those who serve in the army in the middle class, now Netanyahu is showing them his middle finger.”
He added: “This is the real face of the prime minister, who continues to trample on the public. These edicts will only deepen the desperation.”
Foreign Minister Avigdor Liberman also came out against Netanyahu's initiative. Speaking in an interview with Israel Radio on Wednesday, Liberman expressed frustration that he was not consulted about the move prior to Tuesday's announcement.
Netanyahu and Finance Minister Yuval Steinitz decided Tuesday to bring a proposal to the cabinet on Monday, which would raise the the VAT by 1 percent or more.
Each 1% hike in VAT (which currently stands at 16%) is expected to enrich the government coffers by NIS 4 billion per year. The cabinet will also be asked to make an across-the-board cut for government ministries totaling NIS 700 million.
Government sources in Jerusalem on Tuesday told Globes that the rise in VAT is only a first step determined by Netanyahu as part of a comprehensive plan to raise taxes.
The Knesset Finance Committee passed on Tuesday the cabinet’s decision to double the deficit target from 1.5% to 3%. Steinitz told the committee that the 2013 budget will include tax hikes and spending cuts, but said doubling the deficit target saves the government from having to increase taxes even more than planned.
The new target would help the government remain on track toward the “most important” goal of reducing debt-to-GDP to 60% by the year 2020, Steinitz said.
Netanyahu defended the VAT increase on his Facebook page, saying, “the economic turmoil around us is not decreasing, but becoming stronger in the world. Last year all the leading states had their credit rating downgraded, the US and the leading countries in Europe."
Nadav Shemer and Globes contributed to this story.