New state budget includes unprecedented taxes, extensive cuts

By Zeev Klein, ISRAEL HAYOM

Finance Minister Yair Lapid presents the government with his ministry’s final budget proposal for 2013-2014, outlining aggressive cuts and a series of new taxes meant to help cover some of the state’s 39 billion shekel ($11 billion) deficit.

The bill cuts 25 billion shekels ($7 billion) from government spending in 2013-2014: 7 billion shekels ($2 billion) this year and 18 billion shekels ($5 billion) in 2014.

Some 4 billion shekels ($1 billion) will be cut from defense spending and 2 billion shekels ($560 million) from education and transportation over the two years. Additional cuts, yet to be determined, will be made from the welfare and health budgets.

As part of Lapid’s deal with Histadrut labor federation Chairman Ofer Eini, negotiated to avoid a general strike that could potentially shut the Israeli economy down, a 2 billion shekel cut and wage freeze planned for the public sector will be revised. Finance Ministry and Histadrut officials are still negotiating the final agreement, which Lapid and Eini are expected to sign next week.

One of the biggest bones of contention in the proposed budget bill is the Finance Ministry’s plan for a 3 billion ($841 million) cut in child allowances and day care subsidies. The bill proposes cutting child benefits from 175 shekels ($50) to 140 shekels ($39) per month per child.

Knesset members from all factions are expected to oppose the child allowance cut vigorously. However, the Finance Ministry has already prepared two compromises to help win it a favorable vote: If the proposed child allowance cut meets what ministry sources define as “mere opposition,” the benefit will be cut to 150 shekels ($42) instead of 140 shekels. And if the cut meets fierce opposition that might jeopardize the entire budget bill, the child benefit will be set at 160 shekels ($45) per month.

“Every minister has already declared their ministry a disaster zone, which is fine,” Lapid said on Monday, adding he was ready to “deal with whatever pressure is exerted on me.”

‘Series of new taxes unprecedented’

The budget bill also calls for an unprecedented series of new taxes, which the Finance Ministry believes will yield the state some 20 billion shekels ($562 million) in revenue over the next 18 months.

Value added tax will increase from 17 to 18 percent as early as June, which will automatically drive up public transportation prices, as well as the prices of most goods and services.

Despite raging opposition, the ministry also plans to cancel various value added tax exemptions afforded to the tourism industry, although it has yet to announce its final decision about revoking the VAT exemptions given to the southern resort city of Eilat, whose economy is almost completely dependent on tourism.

The Finance Ministry also plans to raise income taxes by 1.5% from January 2014 for those earning more than 5,000 shekels ($1,400) a month, a move that is expected to cost the average Israeli family an extra 3,000 shekels ($840) a year.

The ministry also plans a 0.5% rise in the health tax for high income earners.

Other taxes include revoking the health tax exemption afforded to housewives; imposing a 20% tax on alcoholic beverages and higher taxes on cigarettes; introducing a new, 25% land betterment tax for individuals who own more than one apartment; and imposing a 35% tax on pension plans for those earning over 15,000 shekels ($4,200) a month.

Lapid also decided to increase corporate income tax by 1% to 26%, as well as impose a uniform 15% tax bracket for all major corporations. However, companies that operate outside central Israel will be excluded and will remain in their current, 10% tax bracket.

An Israel Tax Authority report released on Monday said that the scaled corporate tax employed by the Finance Ministry in previous years, in an effort to encourage capital investment in the private sector, resulted in a staggering 70% tax break for the four largest corporations in Israel between 2003 and 2010.

The four companies, which were not named in the report, paid only 3.3% in taxes, effectively receiving a 5.6 billion shekel ($1.56 billion) tax break in 2010 alone. According to the report, the state will lose nearly 10 billion shekels ($2.78 billion) in 2013 in a similar scheme.

“This is outrageous, but it’s a law that was passed by the Knesset and must be upheld. We will initiate a dialogue with the major corporations and we’ll see what can be done to change the rules of the game,” Lapid said.

“This is a ‘no-choice’ budget, but I believe the public will understand what needs to be done [and will accept the changes] as long as [they] see that we’re treating their money with respect.”

‘Time to change the system’

Speaking at a Calcalist financial conference on Monday, Lapid said, “The middle class is not upset because it has to pay taxes to support those who are less privileged. They are upset because they feel, and justifiably so, that for many years their hard-earned money has been snubbed; that instead of helping the weak, those taxes funded certain sectors, irresponsible tycoons and unnecessary government ministries. It’s our job to change that and create a just system.

“During the election, I kept asking, ‘Where is the money?’ That was a rhetorical question, of course, since we know where it money went — it went to all the wrong places for all the wrong reasons. Today, we’re cutting things no one else dared touch, so now the question is, ‘What will we do with the money?’ We plan to invest it in the working public. It’s their money and they should get it back.”

Lapid also criticized “the tycoons, big unions and certain sectors that are willing to do anything it takes not to be taken for fools … but have no problem making a fool of the middle class. We will fight monopolies, aggressive debt reconstruction schemes and excessive concentration of wealth in the economy, because these are bad for the working public.”

Lapid stressed Tuesday that the austerity measures were short-term, saying, “This is what leadership and taking responsibility are all about. We knew this was going to be hard and we know people are angry, but we can’t be blindsided by anger when the other option spells the economy’s collapse. ”

He said that for the first time in years, “we’re making sure that the middle class is not the only one paying the price — this will affect sectors which until now were politically immune.”

“If we were to do nothing then the hole in the deficit would just grow bigger and social services would collapse,” he said. “Every time you see TV reports about a country about to go bankrupt, you should know that it was brought about by spendthrift politicians who buckled under pressure. That is not going to happen on my watch. In two years, things are going to be completely different.”

May 7, 2013 | 19 Comments »

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19 Comments / 19 Comments

  1. catarin Said:

    Max, we work with what we have.

    No you work with what the ruling class has in a system owned by the ruling class , almost nothing you have belongs to you. You don’t know what you have and you don’t know what they have.
    Unless you use what vestiges of freedom you have left to change the system and take back economic freedom you will soon lose it all forever.

  2. catarin Said:

    Max, this is America, where anyone with hard work and talent can ascend to the top.

    Ha ha , are you deluded. The “top” is occupied – just read Wikipedia. Used to be that people had to go to Uni to learn this stuff – now you the great unwashed can read it on Wikipedia – but you still don’t bother.. sigh… you prefer your fairy tales.

    Since you might be a leftist – read or listen to “Stupid White Men ” by Michael Moore – I generally don’t like Michael -but his analysis of the power system in America is spot on. He especially debunks the mythology of idiots such as yourself who think that by supporting the system “as is” you are going to get an opportunity to join the ruling class- or even get an equitable share of the pie.

    You are in fact supporting a system that makes sure you won’t even get the table scraps. You can’t even hope to change this system til you can see it for what it is.

    You are so far away from that pie you don’t even know what it is, more importantly you pathetic souls don’t even know what you have already last. You are in a Stalinist world dominated by economic fascists , as every moment goes by , you lose more and more of your freedom.
    The rhetorical question is – will you people finally wake up and when and if you do what difference would it make?

  3. @Catlin LOL you are one sock-puppet following another.
    Obama doesn’t make any decisions – he does what his “advisers” tell him to do. Nothing goes on inside his skull but how to behave and say the right things in public – that is what he is there for to be the “image”
    ..
    “Your” political views .. I doubt they are “yours” .. probably been implanted by Mass media.


    Obama’s family doesn’t have enough wealth to even quality as a member of the ruling class – maybe after a few generations his family may be – the Bushes do though.
    If Obama continues to play ball he may aggrandize enough wealth and economic power to become part of the ruling class. He is still just a prospect – when the gang church finally votes him in, he can wear his colors at the Bildenburg group or whatever.

  4. Max, I beg to differ. He is now close to five years in office, and there has been only one decision he made I didn’t agree with and that is early on when he decided to send more troops overseas to Iraq and Afghanistan. I don’t follow closely what’s happening in Washington. With the behavior of the Republican House, it’s become silly and boring to follow their news.

    Obama and I are pretty closely aligned in our political views. As far as his being influenced by outside forces, he is, just like any other president. But not to the point of selling his soul. What I’ve read is he gets input from all sorts of experts before he makes his decisions.

    He hasn’t made a decision on the Keystone oil pipeline because reports keep coming in for and against. I can’t help but think we will cause environmental damage with fragging. Forcing those chemicals into the Earth might cause problems down the road.

    So here’s to the Great White Father in Washington! Or is it the Great Tan Father?

  5. catarin Said:

    In case you didn’t know, Obama is the King. No one makes decisions for him. Sometimes it takes a long time for Obama to make a decision. John Kerry confers with him frequently.

    The reason you don’t know the truth is because my comment is in moderation. If only it were to come out of moderation and understood, your world would crash and burn and you would be in a much needed state of shock which is the first step for your deprogramming.

  6. catarin Said:

    In case you didn’t know, Obama is the King. No one makes decisions for him. Sometimes it takes a long time for Obama to make a decision. John Kerry confers with him frequently.

    This is total nonsense. There is not a shred of proof for that and plenty to the contrary.
    ALL the political parties in North America are funded by the ruling class – none of them rise to importance unless vetted by the ruling class. They move back and forth between corporate positions given to them by the ruling class and being politicians making decisions that favour the economics of the ruling class.
    The ruling class has all the economic power and wealth – they own the MSM, corporate media, corporations and politicians. Obama takes the ‘instructions” of his advisers who are the representatives of the ruling class.
    The ruling class does not care which part is in power because it owns them both – their apparent differences are just window dressing. Example – there are no health care reforms in America – because the insurance health services denial profiteers/racketeers still exist. Nothing has changed about Israel – it was the same when the Bushes were around – Bush put in the call to stop Lebanon II. There are no changes to the aggrandizement of wealth by the ruling class – behind the front -they are getting richer and cementing their absolutism on the population. The American political-economic systems is totalitarian and Stalinist.

    Thatcher,Bush, Regan, Obama knew nothing about economic theory or foreign policy analysis – that would make them geniuses beyond the level of Goethe or Galileo, when in fact they were simply plodding well-trained follower front men dullards who took their instruction from the ruling class – they all do.

    You have swallowed the rat poison ,the kool aid, They use your petty hatreds against you. You can’t even see the elephant in the room- which is the people who simply own everything – they are not the rich they are not even on your scale they are beyond rich – they are the owners and they own you, you houses , your cities and your thoughts. You are jerking on a string for them.
    Putz!

  7. In case you didn’t know, Obama is the King. No one makes decisions for him. Sometimes it takes a long time for Obama to make a decision. John Kerry confers with him frequently.

    Besides, no one can make Israel give away her land but the Jews.

  8. catarin Said:

    Max I got my letter off to John Kerry and told him not to use the Holy Land as a pawn

    OK Wow! But you sent it to the wrong guy – you have to send it to the members of the ruling class who finance and give their marching orders to the Democratic Party.
    You are talking to the donkey, you have to talk to the rider.

  9. Max I got my letter off to John Kerry and told him not to use the Holy Land as a pawn. I really don’t care what lists they put me on. If anyone shows up I’ll put him/her to work doing chores.

  10. catarin Said:

    I’ll write directly to John Kerry to express my views. So there.

    LOL I’m sure he really really cares. LMAO.
    Probably you will just succeed in getting on the DHS watch list.

  11. I see my other post was deleted because Ted doesn’t want to ruffle the feathers of the Arabs.

    I have one more thing to add I see the West and Arabia are cooperating in defense proposals, which is wonderful news But please don’t do it at the expense of the Jews and Christians of this world. I remember reading in WW II the Brits threw the Jews to the wolves so it could make oil agreements with the Arabs. Don’t expect Israel to give up land to satisfy the Muslim potentates of the Middle East.

    Oil is on its way out, anyway. I’ll write directly to John Kerry to express my views. So there.

  12. Billion dollar bet on rate cut pays off

    George Soros.
    Best of all, it appears the 82-year-old American pulled off the deal three times, all with different foreign exchange brokers in Asia, for a tidy profit of almost $US60 million….
    Soros is a Hungarian-American business magnate, investor and philanthropist, who has built a reputation over the past 25 years of picking the impact of government decisions on currencies and commodities……

    Billions invested in choosing govts globally provides not only a seat at the table and advanced insider information but also the opportunity to create the conditions which create the currency drops. Soros’ “philanthropy”, his contributions to “humanitarian” organizations is no accident.

    Read more: http://www.smh.com.au/business/markets/billion-dollar-bet-on-rate-cut-pays-off-20130507-2j5j5.html#ixzz2SigAhXxg

  13. “Why do the middle and upper income brackets need child allowances?”

    The ruling class can pay child allowances for every soul for the next two centuries and not even blink. You people have no idea the true wealth of the elite and the true wealth that is available – they keep you poor for only one reason – to have power over you.

  14. The four companies, which were not named in the report, paid only 3.3% in taxes, effectively receiving a 5.6 billion shekel ($1.56 billion) tax break in 2010 alone. According to the report, the state will lose nearly 10 billion shekels ($2.78 billion) in 2013 in a similar scheme.

    “This is outrageous, but it’s a law that was passed by the Knesset and must be upheld. We will initiate a dialogue with the major corporations and we’ll see what can be done to change the rules of the game,” Lapid said.

    Bull shit the ruling coalition can change and amend the law in one day if they want and most of the opposition will support it.

    Why do the middle and upper income brackets need child allowances? In a Zionist country why are we paying Arabs to have children then complain about demographic threats to the Jewish character of the country? originally before child allowances became a general entitlement it was paid in place of income tax child deductions. Stop child allowances altogether and create a method of income assistance to needy Jewish families by NGO’s who may distribute funds according to their own criteria (only to Jews). Even the Jewish Agency might be placed to that end.

    The ministry also plans a 0.5% rise in the health tax for high income earners.

    Today there is a cap whereby over a certain income levels nothing is taxed in heath tax assessments. Why only .05% and not 2% or 5%?

    Increased VAT and other indirect taxes hurt the poor and needy more than the rich and middle class.

    Stop paying the PA $3 billion a year. Stop giving free water to Jordan, Gaza etc. Tax Israelis leaving the country. Tax every stock market transaction.

  15. Shy Guy Said:

    Idiots and incompetents at the helm.

    No, It’s the general public that believes this baloney that are the idiots and incompetents. The Israeli ruling class knows what they are doing – just like the North American Ruling class.

    Here you have a ‘budget’ on the 5 percnet of the wealth that is involved with the general public , it doesn’t include the 95 percnet of the wealth owned and used by the ruling class (.01 percnet of population).
    It’s the usual – milk everyone for the wealth – grind them to the dust while doing it, – give the pie to the ruling class – throw a few extra scraps to the upper middle class to act as the palace guard – make sure the dobermans are well fed and lie about everything.
    Suckers..