Finance Minister Moshe Kachlon is considering lowering taxes for working Israelis who earn in the lower deciles of the average Israeli income. Channel Two reported that Kachlon wants to reduce the amount of taxes these workers pay in order to enable them to more easily feed their families. Since the workers do not pay much in taxes anyway, Kachlon feels that there would be more benefit in reducing taxes for them.
According to economic advisers to Kachlon, the state faces a NIS 15 million hole in the next budget. Recent outlays for various programs have conspired to squeeze the budget, and at this time there are few options to fill the gap. With that, Kachlon feels that the loss of the tax money from this segment of the population will not seriously increase that hole.
The report said that Kachlon sees the tax drop as a way to increase and enhance economic activity. In recent months economic growth has slowed, and investments have begun drying up. Currently the biggest motivator of economic activity in Israel is not foreign investment but consumption, both public and private. While Kachlon realizes that this is not a sustainable type of growth, he is willing to give it its due while he works on other ideas to revive investment, the report said.
Last year, the state cut corporate taxes, costing it NIS 1.2 billion in income. The recent cut of Value Added Sales Tax (VAT) from 18 percent to 17 percent resulted in a loss of NIS 4 billion annually, the report added.