Mobile  |  About us  |  Photos  |  Videos  |  Subscriptions  |  RSS Feeds  |  Today's Paper  |  Classifieds  |  Contact Us
The Daily Star
FRIDAY, 18 APR 2014
11:51 PM Beirut time
Weather    
Beirut
22 °C
Blom Index
BLOM
1,214.01down
International
Follow this story Print RSS Feed ePaper share this
Israeli Cabinet approves package of higher taxes, spending cuts
Bloomberg
Israel's Prime Minister Benjamin Netanyahu (C), Finance Minister Yuval Steinitz (R) and Bank of Israel Governor Stanley Fischer attend the weekly cabinet meeting in Jerusalem July 30, 2012. (REUTERS/Sebastian Scheiner/Pool)
Israel's Prime Minister Benjamin Netanyahu (C), Finance Minister Yuval Steinitz (R) and Bank of Israel Governor Stanley Fischer attend the weekly cabinet meeting in Jerusalem July 30, 2012. (REUTERS/Sebastian Scheiner/Pool)
A+ A-

Israeli Prime Minister Benjamin Netanyahu’s Cabinet approved Monday a plan to increase taxes and cut spending in an effort to contain the deficit. Under the plan, approved by a vote of 20 to 9, valu -added tax will be increased by 1 percent to 17 percent from Aug. 1.

Income tax will rise in 2013 by 1 percent for most tax brackets, and by 2 percent for those who earn 67,000 shekels ($16,594) or more a month. Finance Minister Yuval Steinitz raised taxes on beer and cigarettes last week.

“This is a brave and important step that will prevent deterioration in Israel’s economy,” Steinitz said.

The finance minister’s plan was submitted to the Cabinet just days after the Bank of Israel’s monetary policy committee, led by Governor Stanley Fischer, kept the benchmark interest rate at 2.25 percent, in part citing “uncertainty in fiscal policy.”

Steinitz said that the government was drafting plans to meet its new deficit target. The steps approved by the Cabinet include across-the-board cuts in spending this year and next.

“There is no doubt that the government’s recent measures are improving fiscal credibility,” Modi Shafrir, economist at Tel Aviv-based I.L.S. Brokers Ltd., said. “The government’s actions are providing some opportunity for the Bank of Israel governor to continue lowering the interest rate.”

The rate decision was the second time in as many months that Fischer publicly criticized the government.

He said on June 28 that the government’s increased budget deficit target for next year isn’t reasonable and interest rates are unlikely to stay low unless fiscal policy is put on a “sustainable” path.

The Cabinet voted on July 1 to double the deficit target for next year to 3 percent of gross domestic product as the economic growth rate fell to its lowest in almost three years. Fischer had recommended 2.5 percent.

Economic growth is expected to decelerate to 3.1 percent this year from 4.8 percent in 2011, the central bank said on June 25. The slowdown has reduced tax revenue, creating a 2.9 billion-shekel shortfall in the first six months of the year, the Finance Ministry said on July 4.

“Governments that didn’t act on time, didn’t act decisively, and didn’t act responsibly, caused tremendous damage to their citizens,” Netanyahu said at the Cabinet meeting Monday.

In the first quarter, the economy grew an annualized 2.7 percent, the least since 2009. In the second quarter, the economy is expected to expand 2.8 percent, the bank said in the rate decision. Inflation eased to 1 percent in June, the slowest since August 2007.

 
A version of this article appeared in the print edition of The Daily Star on July 31, 2012, on page 5.
Home International
 
     
 
Israel
Advertisement
Comments  

Your feedback is important to us!

We invite all our readers to share with us their views and comments about this article.

Disclaimer: Comments submitted by third parties on this site are the sole responsibility of the individual(s) whose content is submitted. The Daily Star accepts no responsibility for the content of comment(s), including, without limitation, any error, omission or inaccuracy therein. Please note that your email address will NOT appear on the site.

comments powered by Disqus
Advertisement


Baabda 2014
Advertisement
Follow us on Facebook Follow us on Twitter Follow us on Linked In Follow us on Google+ Subscribe to our Live Feed
Multimedia
Images  
Pictures of the day
A selection of images from around the world- Friday April 18, 2014
View all view all
Advertisement
Rami G. Khouri
Rami G. Khouri
Silencing Ayaan Hirsi Ali’s hate talk
Michael Young
Michael Young
Why confuse gibberish with knowledge?
David Ignatius
David Ignatius
Putin will keep rolling, until Obama says no
View all view all
Advertisement
cartoon
 
Click to View Articles
 
 
News
Business
Opinion
Sports
Culture
Technology
Entertainment
Privacy Policy | Anti-Spamming Policy | Disclaimer | Copyright Notice
© 2014 The Daily Star - All Rights Reserved - Designed and Developed By IDS