Finance Ministry Readies Austerity Budget Plan B

Finance officials estimate that some 6.5 billion shekels in taxes will have to be replaced, sources said.

The items under threat are the 3.5% purchase tax on bigger homes, tagged to raise NIS 1.1 billion; the across-the-board 1.5% income tax hike, good for NIS 4 billion; and the tax on pension deposits by high income-earners, another NIS 1.2 billion item.

Acting Ministry of Finance Director General Michal Abadi-Boiangiu, Deputy Budget Director Eyal Epstein, and outgoing Budget Director Gal Hershkowitz are huddling with each other and Finance Committee members to prepare for changes.

Among alternative measures under consideration is a widening of the income tax brackets to avoid hitting people who earn less than NIS 14,000 a month. The yield will be less less than NIS 2-2.5 billion instead of the 4 billion from the proposed across-the-board hike.

VAT on fruits and vegetables is back on the table, said to be worth NIS 1.8 billion, though politically unpalatable, since it will trigger full-voiced public anger.

Two alternatives in real estate: a tax on rental income (the current threshold is NIS 5,000 a month), or a 1% purchase tax on all transactions from the first shekel.

This article appeared in print on page 6 of the July 11th, 2013 edition of Hamodia.