Fischer contradicts Steinitz on tax hikes

Bank of Israel Governor Stanley Fischer disagrees with Finance Minister Yuval Steinitz and thinks higher taxes are needed.

After Governor of the Bank of Israel Prof. Stanley Fischer warned that a recession could push up the budget deficit to 7%, he is continuing his assertive behavior and telling the public his recommendations on fiscal policy. He told the Bank of Israel's Research Department annual conference, "I don't feel comfortable with a 4% deficit. Next year's deficit will be 3.5% and I would prefer something around 3%. We must not change overall spending."

Fischer added, "According to the Bank of Israel's estimates, next year's deficit will probably be 3.5%, and it will fall to just 2% in 2020. If I had to choose, I would prefer the government meets the deficit target and overall expenditure. However, if it will be necessary to change overall expenditure and increase it, something that is not desirable, I would prefer to do it by raising taxes and significantly cutting the deficit, to even a little below 3%.

Yesterday Minister of Finance Yuval Steinitz said that it was not necessary to raise taxes next year. "If we act with economic responsibility, and there is strong leadership under a Netanyahu government in the coming years, there will probably be no need for substantial tax hikes in 2013," he told “IDF Radio" (Galei Zahal).

Fischer also said, "We have a 4% deficit in a situation of almost full employment. I feel very uncomfortable with this deficit in the current situation. If the economy should go into recession, a scenario that we have to allow for, the deficit would grow and it would be very difficult to deal with.

Published by Globes [online], Israel business news - www.globes-online.com - on December 27, 2012

© Copyright of Globes Publisher Itonut (1983) Ltd. 2012

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