Taxes hurt growth but irresponsibility worse, says Treasury chief

"We dont like taxes, but we need an additional NIS 15 billion in 2013."

"We need an additional NIS 15 billion in taxes in 2013, and this is the package submitted to the government today. We dont like taxes and we try to avoid them. There's no doubt that they hurt growth, but the deficit and irresponsibility hurt the economy and growth even more," Ministry of Finance director general Doron Cohen told IDF Radio" (Galei Zahal) today.

"The appearance of irresponsibility in the economy will further hurt growth, as it has in other countries," Cohen added.

As for the austerity measures that the cabinet is due to pass today, including a 1% hike in VAT (which will generate NIS 4 billion in revenues), higher income taxes (according to income brackets), and a NIS 700 million across-the-board cut in ministries' budgets, Cohen said, "The burden is relatively minor. There is fairly low participation by employers."

"The question of the collection of past profits, whether we're talking about black capital or trapped profits, should not affect growth too much," Cohen added.

"We're submitting a tax package that will allow the government to meet the deficit target," Cohen concluded. "If you enter a crisis with a reasonable deficit, the growth of the deficit will be tolerable. But imagine if you enter a crisis with a 5% deficit? These are intolerable numbers, and it's therefore necessary to deal with the concern that that the crisis will increase the deficit."

Published by Globes [online], Israel business news - www.globes-online.com - on July 30, 2012

Copyright of Globes Publisher Itonut (1983) Ltd. 2012

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