Labor Party MK Amir Peretz on Sunday criticized the across-the-board taxation hikes that Prime Minister Benjamin Netanyahu and Finance Minister Yuval Steinitz intend to bring before the Cabinet on Monday. 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.
The 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.
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.”