Bank of Israel governor opposes tax cuts

Governor of the Bank of Israel Karnit Flug says she opposes the finance minister’s proposal to use surplus tax revenues in 2017 to cut taxes, Globes reports.

Speaking to the cabinet this morning while Moshe Kahlon presented his planned multi-year budget framework, Flug reportedly said: “Given the state of the budget, it is clear that cutting taxes now, which will lower taxes in the coming years, is inconsistent with meeting the fiscal targets for the coming years. This means that if taxes are cut now, it will very likely be necessary to raise them by 2019. This fluctuation in tax rates is bad for the business sector, and cannot help achieve long-term targets that tax cuts are capable of achieving (encouraging labor, for example).”

The cabinet nonetheless voted in favor of Kahlon’s proposal to release some NIS 3.5 billion in budget surplus to allow him to draft a 3-year budget framework for 2019, 2020 and 2021.