The Bank of Israel supports Minister of Finance Yair Lapid's decision to cancel the income tax hike that was scheduled to come into effect on January 1.
"In the view of the Bank of Israel, there is great importance in attaining the deficit target set for the 2014 budget, 3% of GDP. Thus, the decision to adjust the expenditure ceiling for 2014 in accordance with the cancellation of the increase in income tax on individuals, so that the overall effect of the moves on the deficit is neutral, is appropriate."
The Bank of Israel cautions, however, "Over the coming years, the budget deficit must continue to decline, as reflected in the targets adopted by the government for 2015 and onward. The budgetary steps which were decided upon toughen the challenge of meeting the deficit target of 2.5% of GDP which was set for 2015. Meeting this target will require extensive policy measures, since the cost of the programs which the government decided on is already greater than the expenditure limit which will allow meeting the target."
Published by Globes [online], Israel business news - www.globes-online.com - on November 26, 2013
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