Israel's tax burden is among the highest in the West, reaching 39.1% of GDP, compared with 32.5% among developing countries and the OECD average of 36.9%.
Ministry of Finance chief economist Dr. Michael Sarel predicts that Israel's tax burden will plummet in 2005. Decisions already taken will cut taxes by NIS 5-6 billion, or 1% of GDP, next year.
Sarel stressed that taxes must be cut by NIS 35 billion, seven times the cuts planned for 2005, in order to reach the tax burden level of the OECD.
Israel's public spending is also among the highest in the West, reaching 55.5% of GDP, compared with the OECD average of 41%. Even excluding defense spending, Israel's public spending is very high, amounting to 47% of GDP.
Under the 2005 budget targets, the Ministry of Finance plans to reduce spending as a proportion of GDP by 3.5%, or NIS 18 billion. Two-thirds of the decline expected to come from the increase in growth from 1.3% in 2003 to 3.8% in both 2004 and 2005, and another third (NIS 6 billion) from budget cuts.
Published by Globes [online] - www.globes.co.il - on July 11, 2004