Knesset approves value-added tax hike

The Knesset on Wednesday voted in favor of a 1 percent rise in value-added tax to a total of 18%, due to go into effect by the end of the week.

The vote followed a stormy discussion on one of the most bitterly contested budget clauses proposed by the Finance Ministry, with opposition and coalition MKs sharply criticizing the move. Parliamentarians from across the political spectrum also expressed outrage at the absence of Finance Minister Yair Lapid (Yesh Atid), who left earlier in the day for a family vacation in France.

The decision was approved by 46 Knesset members, with 39 voting against. Thirty-three were not present for the vote, one abstained (Likud’s Moshe Feiglin), and one refrained from participating.

MK Miri Regev (Likud) said Lapid was “spitting in the face of his voters,” and wondered how he could “look them in the eye.” Regev was one of those absent for the vote.

“Wasn’t he the one talking about the middle class, about how nothing should harm the middle class? And then he comes and increases VAT by 1%. So where are the ‘new politics?’ Where are the ‘politics with compassion?'” asked Regev, evoking Yesh Atid’s election slogans.

Opposition leader and Labor Party chair Shelly Yachimovich slammed the finance minister along with the rest of the coalition, asking, “Are you not ashamed?”

She called the increase a “tax of the cowardly,” further blasting the government for going after the public, which, she said, has no “lobbyists or finance officials in its corner, a public that is silent.”

The chairman of the Knesset Finance Committee, MK Nissan Slomiansky (Jewish Home), said the tax hike harmed the middle class and low-income earners, but acknowledged that the current government had received a budget with a deficit of NIS 39 billion and that taxes were an important part of closing the deficit.

Earlier this month, the Finance Ministry approved a series of austerity measures aimed at cutting government spending by some NIS 6.5 billion (almost $2 billion) in 2013 and by NIS 18 billion (some $5 billion) in 2014, largely through cuts in defense, child benefits (NIS 2 billion, or $560 million) and transportation infrastructure projects (NIS 1.2 billion, or $336 million). Those measures are meant to slash a burgeoning national deficit that in 2012 reached NIS 39 billion ($11 billion), 4.2 percent of the gross domestic product.

The Finance Ministry’s budget proposal also increased income tax by 1.5% across the board, and boosted corporate tax to 26%, among a series of measures.