Tax Cut Talk Rattles Finance Officials


Even as a multibillion-shekel budget surplus has filled the coffers of the Treasury, offices in the higher echelons were filled with consternation on Thursday over reports of coming tax reductions.

Finance Ministry officials told Globes they were surprised and worried that the media was arousing unrealistic expectations.

Haaretz reported that Lapid instructed chief economist Michael Sarel and budget division director Amir Levy to examine the possibility of revising the 2014 budget. Discussion was said to be focused on a possible cancellation of a planned hike in income tax rates set for January, as well as rescinding a 1.5-point increase in corporate income tax, or lowering the VAT from 18 percent to 17 percent.

“There are no discussions on this matter, and there have never been any,” a top Ministry of Finance official said. “Nothing has changed since the discussion held following the change in measuring GDP, which gave us a bit more room to maneuver.

“We cannot understand where all these headlines came from. Nothing has changed, and things are as planned. The first discussion on the matter will be held in two weeks, when the preliminary data for November will come in.”

“Any claim or mention of reducing taxes is irresponsible,” said a spokesman for Finance Minister Yair Lapid.

The windfall comes mostly from one-time events — NIS 3.3 billion on the sales of companies (Iscar and Waze), and NIS 4.3 billion in taxes on the release of trapped profits — which cannot automatically be translated into lower taxes, they explained.

Furthermore, the 1.5-percent hike in income taxes and the corporate tax will go into effect in 2014; the extra taxes collected are not included in the 2014 budget but in the 2013 budget.

The ministry also points out that the 2014 deficit target is 3 percent of GDP, or NIS 30 billion, and that latest figures show the deficit for the past 12 months at NIS 33 billion — 10 percent above the target. The ministry fears that easing the tax hikes will result in missing the 2014 deficit target, as happened in 2011-12.

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