Average Israeli income tax rate among lowest in OECD
If there is a ground operation, it will put a strain on an already overstretched 2013 budget.
Senior Ministry of Finance officials met for an emergency discussion this morning on the consequences of Operation Pillar of Cloud in the Gaza Strip. The ministry refused to comment today on the cost of the operation. "It's impossible to know. It's very early to estimate the costs. Even we don't know if this is a macro event," a senior official said.
So far, the costs of the operation amount to the military cost and indirect damage to property. A special fund at the Tax Authority is set aside for the latter, so that the fiscal consequences are very limited.
Treasury official said today that, in order for the costs to be estimated, the following points needed to be clarified: whether there will be a general call-up of reserves; whether there will be a ground operation; and how long the operation will last. "The situation at the moment is not one of equilibrium either the operation will end in the next few days, or it will be broadened. If it is broadened, reserves will be mobilized, and then there will be large payments to National Insurance, and ground forces will go in, involving costs of munitions. Then we will be somewhere else. It will be a macro event, and we will be in Operation Cast Lead 2. Operation Cast Lead 1 cost us NIS 2-3 billion. That will already be a macro event."
If an Operation Cast Lead 2 scenario materializes, Finance Ministry sources say that "we will have to sit down and examine what we should do", as one senior official put it. It will be recalled that there are budgetary commitments for 2013 of some NIS 12 billion more than permitted under the fiscal regime. The deficit for 2012 is expected to be higher than 4% of GDP, and for 2013, because of the worsening in the slowdown in economic activity, a similar deficit is projected. An operation costing NIS 3 billion like Operation Cast Lead will be a heavy burden on the state budget in 2013 and will oblige the government to make bigger spending cuts.
The Ministry of Finance also understands that to the extent that the fighting is prolonged, the defense establishment will come along with additional budgetary demands in another few months in advance of the drafting of the next budget. "That will certainly happen," said a senior Ministry of Finance official, "but we really don't want to start arguing with them now. This is not the time."
Ron Eichel, Chief Economist and Strategist at Meitav, wrote today that, in his view, the direct daily cost (not including loss of output by businesses) of the current operation will be lower than that of Operation Cast Lead, which was estimated at NIS 100-200 million, and will be about NIS 100 million. The reason for this, according to Eichel, is that Operation Cast Lead opened with a massive attack by the Air Force, in contrast to the surgical strikes being carried out this time. Furthermore, Eichel points out, in Operation Cast lead the Iron Dome rocket interception system didn't exist, and it can therefore be expected that the civilian damage will be lower than in the earlier operation, despite the high cost of firing an Iron Dome missile ($35,000-50,000 each). Eichel believes that, if there is a ground operation and costs grow to NIS 2-3 billion, "we will pay, through extra taxation and not through an expansion of the deficit, which is already at the upper limit of what is considered acceptable by the rating agencies."
Published by Globes [online], Israel business news - www.globes-online.com - on November 15, 2012
© Copyright of Globes Publisher Itonut (1983) Ltd. 2012
You comment was recieved and soon will be published.
Thank you for posting your comment, which will be reviewed for publication.
Load more comments
Average Israel tax rate has dropped in past 3 years, while rising in most OECD countries.
Gov't opens meat and dairy markets to imports
The government focused on products worth 17% of average Israeli family expenditure.
Israel-Lebanon deadlocked over offshore border
The dispute is delaying publication of an exploration tender for Lebanon's Block 9.
Barclays backs Yair Lapid's policies
"Under Lapid, the government has limited expenditure and increased revenues."
Ya'alon and Lapid clash over defense budget c'tee
The finance minister wants an official from his Yesh Atid party on the Locker Committee.
CPI up 0.3% in March
The index reading is a surprise, as analysts had estimated March inflation at 0.1%.
Lapid seeks NIS 1b for Holocaust survivors
This budget is on top of the NIS 835 million allocated over the next five years.
Abramovich books entire Israeli hotel for Passover
"Daily Mail": Roman Abramovich booked 111 rooms in Mitzpe Ramon's Beresheet Hotel.
Govt set to approve food imports reform
Israel will adopt EU regulations, making imports of non-sensitive foods cheaper.
"You can't teach entrepreneurship"
Angel investor Zohar Gilon relies on his own judgement rather than due diligence when selecting investments.
If Rose Fostanes played basketball
Reforms in regulations for foreign caregivers are welcome, but don't go far enough.
Antitrust Authority disappoints on gas competition
The only new company that will compete against Tamar and Leviathan will own less than 8% of Israel's proven gas reserves.
When innovation means a refrigerator
Jamshyd Godrej believes economic development in India must go hand in hand with environmental and social awareness.
Prof. Zvi Eckstein supports NIS 3.30-3.40/$ floor rate
The former deputy Bank of Israel Governor is the first senior figure from the financial system to advocate a floor rate.
2013 boom year for Israeli high-tech
In the first half of the year, there was a 52% rise in demand for mobile and web developers, and salaries are up as well.
Strong shekel forces Israeli manufacturers abroad
Israeli manufacturers tell "Globes" they are losing money due to the current strength of the shekel.
"Ending QE3 will harm the economy"
Prof. Richard Clarida will tell "Globes" Israel Business Conference that the main risk to the US economy is its political system.
Israel offers favorable tax regime for companies
"Globes" and Baker Tilly Israel accountants found Israel's tax benefits are among the most attractive in the West.
Slowdown will worsen
The vested interests that continue to claim that the economy is improving are deceiving the public, says Eyal Horowitz.
Can the US maintain growth after QE3?
Leading economists will discuss "The US: catch 22 the zero interest rate" at the "Globes" 2013 Israel Business Conference.
"The worst could still be ahead in Europe"
Prof. Charles Wyplosz will discuss Eurozone recovery at the Globes Israel Business Conference on December 8-9.
"Let capital pipelines function to full potential"
Amir Bramly argues that limited investment supply is stifling small and medium Israeli companies.
Budget cuts threaten 10,000 defense industry jobs
Senior executives warn many factories are in danger of closing due to the drying up of defense ministry's orders.
Israel faces water surplus
The Water Authority is considering scaling back production at desalination plants.
Global economic trends are disturbing
World trade is not picking up, and only a handful of countries are recovering strongly - but Israel is among them.
Is recovery around the corner?
At the conference on December 8-9, leading experts will examine the prospects for global recovery in 2014.