Shas adds voice to chorus of opposition to PM’s proposed budget cuts

The Shas and Independence Parties said Sunday that they oppose proposed budget cuts and tax hikes. By doing so, they joined a wave of criticism of the fiscal initiatives that Prime Minister Benjamin Netanyahu and Finance Minister Yuval Steinitz intend to bring before the Cabinet on Monday.

Despite the opposition, the economic package is expected to pass the government by a wide majority.

Late Sunday, Shas announced it was against the proposed ministry cuts and tax raises for the 2013 budget.

“A tax hike will hurt thousands of families in Israel already trying to make it with the high cost of living,” party head Eli Yishai said.

Government ministries’ annual budgets — with the exception of education, welfare, and the military — are to be cut by 5% in an effort to prevent the economy from plummeting into a recession. The ministerial cutbacks are expected to save NIS 700 million over the next year.

Housing and Construction Minister Ariel Atias, also a member of the religious party, came out strongly against the measures.

“With one hand, [the government] promises benefits to the public, and with the other takes from them through taxes,” he told Ynet news. “We need to remember who advocated to lower the taxes through growth. They said the cuts would not hurt the welfare state, but [lowering] rent help and public housing — that does damage the welfare state, and in the poorest communities. My ministry is not able to absorb these cuts.”

Independence Party Ministers are meeting Monday morning in order to decide how to vote on the prime minister’s proposals, which include wide-ranging budgetary cuts and tax increases. “The cuts [to the Ministry of Industry] should be canceled, just as they were for the Ministry of Education,” the party stated.

Defense Minister Ehud Barak, leader of the Independence party, added that there should be a multi-year budget for the IDF and the security system “in order to ensure the necessary resources for our long-term plans are allocated, in order to be prepared for a Middle East that is changing in front of our eyes.”

Public Security Minister Yitzhak Aharonovitch also voiced opposition to budgetary cuts Sunday, saying the move would increase crime and affect people’s personal security. “It deals a blow to existing workflows… It must not happen,” he said.

The Health Ministry also protested against intended budgetary cuts on Sunday. Deputy Health Minister Yaakov Litzman said he opposed the move, saying that “health is just as important as education is to the public.”

Doctors and patients groups sent letters to Prime Minister Benjamin Netanyahu urging him not to go ahead with the intended cuts. The prime minister responded that the trimming of the budget would only affect the overhead costs of government hospitals and not the country’s large HMOs.

Also on Sunday, Labor Party MK Amir Peretz criticized the across-the-board taxation hikes Netanyahu and Steinitz intend to submit. Speaking to Israel Radio, Peretz said the tax hikes put the burden on the weaker economic classes, letting the rich off cheaply.

Peretz said the government should instead be introducing measures such as the imposition of an inheritance tax and raising the tax cap on salaries and on capital — steps which would affect the richer sectors. A former Histadrut trade union chief, Peretz said the planned hikes “add fuel to the social fire.”

The tax raises — pending approval on Monday — are part of a package of measures officials say are needed to finance economic reforms, including free schooling from age three, and to head off economic crisis.

Value Added Tax is to rise from 16% to 17%, while the income tax on those who earn more than NIS 1 million per year will rise 2%.

The purchase tax on cigarettes went up last week from 260.6% to 278.6%, raising the average cost of a pack of cigarettes, currently about NIS 20, by NIS 2-3. Purchase tax on beer was also raised, from NIS 2.18 to NIS 4.19 per liter.

Treasury budget director Gal Hershkovitz said Sunday the economic adjustments are consistent with the government’s deficit target of 3%. Hershkovitz said the overall package of cuts and hikes is balanced, sharing the burden fairly among the different economic classes.

Hershkovitz said Israel has to adjust its budgeting as a consequence of the European financial crisis, adding that a failure to implement the plan would take a higher toll on the taxpayers in the future.

Bank of Israel Governor Stanley Fischer on Saturday said the tax raises were “brave and vital.”