Jul.27, 2012 | 5:38 AM–Prime Minister Benjamin Netanyahu promised yesterday that the tax hikes and spending cuts in the state budgets for this year and next will not come at the expense of the average Israeli.

“Even after the steps we take on Monday, families in Israel, the middle class, the weaker populations will still have more money in their pockets,” the prime minister said at the end of a meeting with Finance Minister Yuval Steinitz and Bank of Israel Governor Stanley Fischer to discuss the 2012 and 2013 budgets.

Netanyahu sought to ease concerns a day after Steinitz announced the government was raising taxes on cigarettes and other tobacco products. On Monday, the cabinet is also expected to approve an increase in taxes amounting to NIS 9 billion this year and next at its weekly meeting, without waiting for the 2013 budget. In addition, the Israel Tax Authority and Justice Ministry are preparing new legislation to crack down on tax cheating.

Netanyahu said on Wednesday that decisions on budget cutbacks in 2012 would not affect funding for education and social services. Yesterday, he went further by insisting that ordinary people would still be better off despite the spending cuts and tax hikes.

Referring to a new law to provide free schooling from age 3, Netanyahu said, “Hundreds of thousands of families will save NIS 800 a month. We have created tax credits for working families worth hundreds of shekels a month that went into effect in January 2012. We’ve initiated serious reductions in monthly cell-phone bills and have free dental care for children under age 12.

“This is a major change that in the end has left most of Israel’s citizens with more money in their pocket,” he said.

Deep dilemma

Netanyahu faces a deep dilemma as slowing economic growth has cut into tax collections at a time when the government has made a host of new spending commitments, such as free preschool education.

On the one hand, Netanyahu is concerned about public opinion. Elections are likely to be called in the first half of next year as fiscal austerity measures are taking their toll. On the other hand, he cannot afford to allow deficit spending to grow to more than 3% of gross domestic product without upsetting financial markets, which are alert to fiscal imbalances more than ever because of Europe’s troubles. He also jeopardizes economic growth and risks sparking inflation with overspending…Read More>>

Share/Bookmark