"The truth has to be told: Yair Lapid is trapped. The tax burden on the middle class will not fall in the next 18 months, said former Ministry of Finance director general Ben-Zion Zilberfarb at the "Globes" Bar Economics project at Tel Aviv's Storage Pub yesterday. "There are no magic solutions in economics; there is a price for every cut. For example, reducing the children's allowance will save the budget money, but will drive more families below the poverty line."
Commenting on housing prices, Zilberfarb warned, "The problem of rising home prices is due to the low interest rate, which means low cheap mortgages, and everyone is buying apartments. We're no different from the rest of the world in this regard."
Zilberfarb disagrees with Ministry of Finance officials, and predicts that housing prices will fall, and jeopardize the banks. "Everyone who looks at housing prices knows that prices will fall. This is also true historically." He warns, "What will a family do when the apartment it bought for NIS 1.5 million falls to NIS 800,000? This jeopardizes the public and the financial system."
Zilberfarb said that there is no alternative to budget cuts in order to meet the deficit target, but said that the cuts would not greatly harm the public. "In the next two weeks, there will be a lot of stories in the newspapers that the defense budget cut will cause real harm to Iron Dome. Don’t believe it. Every ministry will leak the spiciest reports to argue why its budget should not be cut; but the budgets can be cut."
He added, "All these measures will make headlines, but the next 18 months won't be better. Lapid's promises about housing and helping the middle class will have to wait."
Zilberfarb said, "The defense budget can be cut, and there is no alternative to raising taxes - but which taxes? There are just taxes, and there are taxes that will have to be proposed again, such as the VAT exemption on fruits and vegetables, and all kinds of other exemptions, such as the VAT exemption in Eilat, which can be abolished."
Prof. Zilberfarb currently serves as the Dean of the School of Banking and the Capital Market at the Netanya Academic College. He is an adviser to the National Economic Council, and a director at Delek Group Ltd. (TASE: DLEKG), Perrigo Company (Nasdaq:PRGO; TASE:PRGO) and Infinity Private Equity.
The "Globes" Bar Economics project is a unique product which focuses on the importance of making economic information and personal financial education accessible to the general public. The project involves lectures and open discussions at select pubs nationwide. The next events will be held in Jerusalem, Haifa, and Beersheva.
Published by Globes [online], Israel business news - www.globes-online.com - on April 4, 2013
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