VAT is set to rise by 1% or even more following a decision by Prime Minister Benjamin Netanyahu and Finance Minister Yuval Steinitz to bring the proposal to the cabinet on Monday.
As already reported by "Globes" each 1% hike in VAT will enrich the government coffers by NIS 4 billion in revenues. The cabinet will also be asked to make an across-the-board cut for government ministries totaling NIS 700 million.
Government sources in Jerusalem today told "Globes" that the rise in VAT is only a first step decided upon by Netanyahu as part of a comprehensive plan to raise taxes. The government deficit in 2013 is expected to reach NIS 58 billion compared with the target of NIS 30 billion and the government must formulate an overall plan of cuts, tax hikes and ministry budget cuts to reach this target.
More than this, even in 2012 the deficit target, which was originally 2% of GDP, or NIS 20 billion, is expected to be exceeded and to be closer to NIS 40 billion. Therefore, Netanyahu has adopted the Budget Department's proposal and already decided to implement the required action to prevent Israel sliding into a financial crisis as has happened in countries like Spain and Greece where fiscal credibility has been lost.
However, sources inform "Globes" that there will be no cuts affecting pensions for the elderly, disabled and Holocaust survivors.
Published by Globes [online], Israel business news - www.globes-online.com - on July 24, 2012
© Copyright of Globes Publisher Itonut (1983) Ltd. 2012