New Israeli taxes are steps towards a $25-30bn war budget

Thursday, July 26, 2012
By Paul Martin

DEBKAfile
July 26, 2012

The Israeli government convenes Monday, July 30, to approve an austerity-cum-taxation package entailing a 5-percent, across-the-board cutback in government ministry budgets to raise NIS 1 billion, or $250 million, in revenue; a tax hike will yield another NIS 3 billion, or $750 million. Both steps will generate an estimated total income of about one billion dollars.
Prime Minister Benjamin Netanyahu and Finance Minister Yuval Steinitz explained Wednesday, July 25, that these measures are vital to save Israel from economic decline like Germany, whose credit rating turned negative this week, or disaster like Greece and Spain which teeter on the brink of bankruptcy. Even America’s economic troubles are cited as worth avoiding.
Beer and cigarettes went up that night as a foretaste of the new measures.
Government leaders warned that the new steps were just the first round of further cutbacks and tax hikes in store for 2013. They are estimated to realize a further revenue injection of NIS 20 billion ($5 billion).
The first package was produced this week at an emergency economic marathon led by the prime minister, Bank of Israel Governor Stanley Fischer and other heads of the economy. The public was informed that the most urgent item on its agenda was ways and means of keeping Israel’s annual deficit within the 3-3.4 percent limit despite rising calls on the national purse. In every statement, ministerial spokesmen stressed that more tough measures were in store after the current round.
But for now, the education, social welfare and defense budgets remained untouched.
Some critics of Netanyahu government critics blame its policy of overspending in response to a wave of social protesters; others resent the one percent hike on VAT on purchases as hitting low-income groups.
At the same time, DEBKAfile’s sources in Jerusalem report that Netanyahu and Steinitz have rightly turned genuine economic difficulty into a lever for getting the country on track for a war economy, without saying this in so many words.

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