The government last night approved an amended Y2000 draft budget. Opposition by cabinet ministers forced Prime Minister Ehud Barak and Minister of Finance Avraham Shochat to back down on a third of their original budget cuts proposal.
In this framework, the proposed child allowance and education budget cuts were cancelled. The defence budget cut was reduced by NIS 250 million, and will amount to less than NIS 1 billion. The infrastructure budget was increased by NIS 800 million, of which NIS 500 million will come out of the cash budget and NIS 300 million will consist of debt limit. Next year's infrastructure investment will reach NIS 2.8 billion.
According to Barak's proposal, the budget cut deficiency, totalling NIS 1.75 billion, will come from new taxes. The government agreed a higher ceiling for National Insurance Institute and health tax payments, up to five times the average wage in the economy in lieu of the current 4 times. A one-year ad hoc provision will regulate these matters, and revenue will amount to NIS 450 million.
Diesel oil will also increase in price, bringing in an additional NIS 350 million a year. All ministries will take an across-the-board NIS 200 million budget cut. An additional NIS 750 million will be collected in taxes from the self-employed and companies, by hard-pedalling enforcement, especially in income tax.
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Fourteen ministers voted in favour of the budget. David Levy, Yitzhak Levy, Eliyahu Suissa and Nathan Sharansky voted against. Ran Cohen and Shlomo Ben-Ami abstained. Three Shas ministers (Eli Yishai, Shlomo Benizri and Yitzhak Cohen) absented themselves from the cabinet session in protest.
Associates of Yishai stated that Shas ministers would not attend cabinet sessions until grants were transferred to the Shas religious educational system, Maayan. Shas demands immediate payment of NIS 25 million.
Barak said, following approval of the budget, that his government was moving to express the real order of priorities, while working within the severe constraints left by the previous government, including the longest, deepest recession in the past generation. "We very much hoped that the deficit framework could be preserved and a change instituted in the order of priorities in education and infrastructure, without taxes needing to be raised", he said. "This is part of the rearrangements that are vital to enable greater investment to be made in infrastructure".
Barak promised that the tax increment would be eliminated in a year's time, and that meanwhile, a comprehensive tax reform would be implemented. He estimated that the new budget, together with the other economic measures the government is about to take, would enable the economy to move onto a new and better track.
Published by Israel's Business Arena September 8, 1999