After a marathon 20-hour session lasting most of last night and continued this morning, the cabinet approved the budget for 2009-2010. The vote was 26 in favor, 4 Shas ministers voted against.
Prime Minister Benjamin Netanyahu, representatives of the Histadrut (General Federation of Labor in Israel), and Ministry of Finance officials continue to meet on approving the budget.
According to the agreement in principle, there will be an across the board cut of 6% at all ministries both in 2009 and in 2010 a combined cut of about NIS 3 billion.
VAT will rise by 1%, and will also be charged on fruits and vegetables. The higher VAT will begin in July 2009, and is scheduled to only be for 18 months. The measure is expected to add NIS 5.5 billion to government receipts, and the VAT on fruits and vegetables is expected to add NIS 2.7 billion.
At the same time, income taxes are expected to continue to be cut, with the maximum marginal tax rate on the highest earners falling from 46% to 44%. The company tax rate will fall from 26% to 25%. The measure is expected to reduce direct tax collections by NIS 3 billion.
The wide ranging cuts include NIS 1.5 billion from the defense budget in 2010. However, it is not from the basic budget, so that it will gradually return to earlier levels in future years.
Published by Globes [online], Israel business news - www.globes-online.com - on May 13, 2009
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