As budget battle heats up, Shas threatens mutiny over sales tax
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As budget battle heats up, Shas threatens mutiny over sales tax

Treasurer heads off fight by boosting education funding, but now faces losing ultra-Orthodox support over zero-VAT coalition promise

Stuart Winer is a breaking news editor at The Times of Israel.

Finance Minister Moshe Kahlon, center, with Finance Ministry director general Shai Babad, right, and ministry budget head Amir Levi as they present the proposal for the state budget for 2015 in Jerusalem, August 2, 2015. (Yonatan Sindel/Flash90)
Finance Minister Moshe Kahlon, center, with Finance Ministry director general Shai Babad, right, and ministry budget head Amir Levi as they present the proposal for the state budget for 2015 in Jerusalem, August 2, 2015. (Yonatan Sindel/Flash90)

Finance Minister Moshe Kahlon announced on Tuesday that he will increase funding for education in the coming year as he attempted to smother fires within the coalition over the upcoming budget.

Though Kahlon seemed to have headed off a battle with Education Minister Naftali Bennett, who threatened to torpedo the budget if it included cuts to his ministry, he still faces a mutiny by ultra-Orthodox party Shas, which is threatening to pull support for the budget if a sales tax break is not included.

Kahlon said that an extra NIS 1 billion ($260m) is to be poured into education and transportation in the upcoming budget, according to media reports.

The cabinet is expected to debate and vote on the budget for 2015 by Wednesday. Ministries are still working off the budget from 2014.

On Sunday, Bennett had threatened that the treasurer would not “have votes to pass the budget” if he planned cuts to the education system, after Kahlon presented his budget proposal.

There was no immediate reaction from Bennett following Kahlon’s announcement.

Late Monday, Economy Minister Aryeh Deri also came out against the budget, threatening to pull support in parliament if the value added sales tax on certain staple items is not rescinded.

Shas representatives met with treasury officials to insist that the upcoming budget make good on a coalition agreement demanded by their party that called for removing the VAT on basic food and household items. The meeting ended without an agreement.

Others have also looked to join the scrum.

On Tuesday morning, Likud MK David Bitan said he and three lawmakers from the party would also vote against the budget if it didn’t include enough money for local authorities.

In July, the Shas and United Torah Judaism parties both told Prime Minister Benjamin Netanyahu they would quit the coalition if he backtracked in the 2015 budget on NIS 1 billion ($270 million) worth of allowances for yeshiva students and on the so-called zero VAT law.

Netanyahu has told coalition faction leaders that he intends to renege on some party-specific agreements he made, because they may lead to a decrease in the social and defense budgets and ultimately harm the general public. Those agreements, signed by Netanyahu as coalition talks entered the eleventh hour, came at a cost of NIS 9 billion ($2.4 billion).

Avi Lewis contributed to this report.

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