The Ministry of Finance's revenue forecast for 2015 attached to the budget proposal includes an 18% rise in tax exemptions, which are slated to total NIS 52.61 billion, NIS 8 billion more than in 2014.
The best known reason for the increase in exemptions is Minister of Finance Yair Lapid's 0% VAT bill, due to take effect this year, which the ministry expects to cost NIS 2 billion. "Globes" reported that the Bank of Israel believes that this estimate is too conservative, and that the lost revenue will be NIS 800 million more that the ministry's estimate.
Other causes of the increase in tax exemptions include the amended Law for the Encouragement of Capital Investment. Tax exemptions resulting from this law are projected to total NIS 7.6 billion in 2015, compared with NIS 6.7 billion in 2014. The exemption for pension funds is projected to reach NIS 13.9 billion in 2015, compared with NIS 12 billion in 2014, and the VAT exemption for fruits and vegetables, which totaled NIS 2.76 billion in 2014, is projected to rise to NIS 3.2 billion in 2015. The new import tax exemption on online purchases is projected to cost NIS 370 million, and fee exemptions are expected to rise by NIS 80 million.
Despite the negative growth figures for the third quarter published this week, Ministry of Finance chief economist and director of state revenues Yoel Naveh said today that growth would reach 3% in the coming year. The Ministry of Finance's official 2015 growth forecast is 2.8%, while the Bank of Israel is predicting 3% growth. Other economists, such as Dr. Zeev Rotem, believe that the growth rate will be much lower - between 1% and 2%.
Naveh objects to the plan to raise the minimum wage, warning, like his predecessor, Dr. Michael Sarel, that it will cause unemployment among young people lacking work experience. "The salary cost for the employer should be taken into account in any decision to raise the minimum wage." Naveh stated. "This cost will rise beyond the monthly cost per employee, due to the rise in provisions for pension and so forth, making it less worthwhile to employ new untrained workers and reducing the competitiveness of Israeli industry."
Published by Globes [online], Israel business news - www.globes-online.com - on November 19, 2014
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