The Knesset on Monday passed a round of austerity measures aimed at curbing the country’s budget deficit, hours after Prime Minister Benjamin Netanyahu and Finance Minister Yuval Steinitz announced that income tax hikes would not affect middle income earners, and would instead be limited to higher tax brackets.
The measures, including a rise in value added tax on all purchases from 16% to 17%, will come into effect on September 1.
Last week, the cabinet approved the series of budgetary measures that included raising income tax and taxes on cigarettes and beer, and budgetary cuts for most ministries. The plan was touted as an economic safeguard against the country sliding into a recession.
Earlier on Monday, Netanyahu and Steinitz agreed with Knesset Labor, Welfare and Health Committee chairman Haim Katz on the cancellation of the planned tax hike for wage earners in the NIS 8,881-NIS14,000 bracket. In addition, tax brackets will be broadened so that the NIS 21,800 tax bracket will now start at NIS 21,000 and the NIS 14,400 bracket will be lowered to NIS 14,000.
Left-wing parliamentarians slammed the measures, saying they would increase the burden on Israel’s middle class.
Netanyahu “has decided to destroy the welfare state,” Meretz MK Zahava Gal-on charged, saying the country’s growing deficit was due to the current government’s reduction of corporate taxes.
Labor head MK Shelly Yachimovich said the prime minister was stuck in an extreme capitalist system that left citizens behind to suffer while the rich got richer.
“[With] one hand [the government] slapped the middle class and the poor in the face, while the other hand showered free gifts on Israeli society’s thin crust of affluent [citizens],” she said.
The policy, Yachimovich said, was weakening the country and tearing it apart.
The austerity plan is also designed to close much of the deficit for the 2013 budget.
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