Fischer contradicts Steinitz on tax hikes

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

27 December 12 09:03, Adrian Filut

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

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