Top Ministry of Finance officials are very worried, and most of all, surprised, by the flood of reports of planned relaxations in income tax and VAT. Top ministry officials told "Globes" today that while tax collection has improved, most of the ostensible budget surplus (NIS 7.6 billion) was from one-time events: NIS 3.3 billion on the sales of companies (Iscar Ltd. and Waze Ltd.), and NIS 4.3 billion in taxes on the release of trapped profits.
The Ministry of Finance stresses that the 1.5% hike in income taxes and the companies tax (the austerity measures) will come into effect in 2014, and that the extra taxes collected are not included in the 2014 budget, but in the 2013 budget. It adds that just NIS 1.1 billion, which it calls a negligible amount, in the additional tax revenues cannot be attributed to one-time events. It says that, for months, there has been no improvement in turnover (economic growth).
Moreover, the Ministry of Finance notes that the 2014 deficit target is 3% of GDP, or NIS 30 billion, and that the latest figures, which are positive, show that the deficit for the past 12 months is NIS 33 billion - 10% above the target. The ministry fears that easing the tax hikes will result in missing the 2014 deficit target, as happened in 2011-12.
"There are no discussions on this matter, and there have never been any," a top Ministry of Finance told "Globes" today. "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 about reducing taxes is irresponsible," said a top official in Minister of Finance Yair Lapid's bureau.
Another top Ministry of Finance source said, "The current wave of reports began because of the trapped profits, which were budgeted in 2013, and which are one-time revenues, not because of GDP growth or the change in GDP methodology, which are permanent factors. In my opinion, there is a 50% chance of easing the austerity measures, because the Ministry of Finance calculated lower revenues, but the results have been higher, which is something known and planned for. But this really has nothing to do with the trapped profits."
Published by Globes [online], Israel business news - www.globes-online.com - on November 14, 2013
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