"Raising VAT by 1% is the lesser evil. I don’t think that it is critical," Knesset Finance Committee chairman MK Moshe Gafni (United Torah Judaism) told "Globes" in an interview today. He added, "I am keeping my strength for the real battle. If the situation does not improve, and we see that the fall in tax revenues continues, I will have to fight with all my strength that no more austerity measures will fall on the poor and the middle class."
Gafni, who participated in the secret discussions that led to the fiscal package, revealed some of the details. "I did not let them (the Ministry of Finance) raise income taxes on all brackets. I told them that that would kill the package. That is why they did not propose raising income taxes on incomes of between NIS 5,200 and NIS 8,880, but I could not achieve a threshold of NIS 14,400. I do not want to raise income tax for these groups. I want an additional tax bracket. If the surtax is to be levied, I will insist that it will not harm the elderly who have to move to assisted living facilities, or young couples buying a home who suddenly discover that they have to spend NIS 800,000 all at once, because these are not rich people."
Gafni says that the deficit should be covered by raising the companies tax, a measure that he intends to push in the Finance Committee, beginning on Sunday. "I also call on companies to contribute to the effort. I do not ridicule the saying that if we raise the companies tax too much, companies will flee and unemployment will increase. But a 1% hike is possible to avoid raising income taxes on the middle class."
Gafni outlined his strategy: split off the trapped profits, stricter tax collection, and changes in real estate taxes from the Ministry of Finance's fiscal package. "I asked, and I received a favorable response, that the trapped profits bill be separated from the package. The amendment to the law will be approved by the Knesset plenum on Monday, but the Finance Committee will not discuss it now, but only in September."
Gafni doubts that the proposals for stricter tax collection will be effective. "I also favor the war on black capital, but my experience tells me that while the Tax Authority provides nice headlines, it ultimately comes to the Finance Committee with a report that does not add one shekel, but only causes problems to honest taxpayers."
As for the pending NIS 13 billion budget cut, Gafni warns, "If anyone thinks that it's possible to cut the live flesh - social services such as health, education, and welfare -he is simply mistaken. This will be another blow to the poor and middle class. It is not certain that the cuts are necessary, and the projections that the Ministry of Finance presented us are as dire and bleak as it says. There is fat in the budget. There are budget holes for when the government suddenly needs a lot of money. Billions are returned to the Treasury every year."
Gafni says that the defense budget can be cut. "Anyone who says that the defense budget is a sacred cow is simply not telling the truth. Everyone knows that the defense budget has items that are not for defense. I am not sure that it is necessary to draft so many soldiers, many of whom are not combat troops, but I cannot say this because I am unfit on this matter."
Asked why no solutions for housing - the reason for the social protest - have been found, Gafni said, "This is a colossal failure of the government. The protest started over housing, and it will continue because of housing. The government has not offered a solution."
Published by Globes [online], Israel business news - www.globes-online.com - on August 2, 2012
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