Deficit Shrink Prompts Tax Re-Think

The deficit fell to NIS 2.5 billion in August 2013 from NIS 4.5 billion in August 2012, according to Ministry figures. It dropped to NIS 12.9 billion in January-August from NIS 17.6 billion in the corresponding period of last year.

Due to that, and a change in the Central Bureau of Statistics’ methodology for calculating GDP, a tax cut could be in the offing. The new formula, which weighs factors such as investments in research and development, along with various fine adjustments in the calculation, increased the overall measurement for 2013 by NIS 66 billion.

The news inspired a self-congratulatory statement from Finance Minister Yair Lapid’s office: “Fiscal discipline is starting to have an effect. We continue to behave responsibly. The Ministry of Finance is examining the significance of the change in the Central Bureau of Statistics’ methodology for calculating GDP.”

News that the deficit had ballooned dangerously last summer was the justification for a raft of austerity measures targeting the poor and chareidim in particular. Had the new formula for measuring GDP been in effect last year, the deficit would only have been 3.9%.

Expenditures totaled NIS 23.3 billion in August, of which NIS 20.4 billion was spent by ministries, and NIS 2.9 billion was in interest payments. Spending by ministries totaled NIS 155.9 billion in January-August. Spending by civilian ministries rose by 5.9%, and spending by the Ministry of Defense rose by 1.6%.

Tax revenues rose to NIS 18.6 billion in August from NIS 17 billion in the corresponding month, and rose to NIS 158.9 billion in January-August from NIS 146.6 billion in the corresponding period.

Capital market taxes totaled NIS 235 million in August, 44% more than in the August last year. Land taxes totaled NIS 654 million in August, 12% more than in the August last year.

This article appeared in print on page 6 of the September 10th, 2013 edition of Hamodia.