Bank of Israel challenges Liberman on tax hikes

Amir Yaron

Finance Minister Avigdor Liberman has pledged not to raise taxes but the Bank of Israel recommends tax hikes by 2023.

The Bank of Israel has submitted to the government a plan for speeding up long-term economic growth and a fiscal framework for financing the plan. According to the Bank of Israel, raising taxes to soon might harm growth while the economy is recovering from the crisis but sees a scenario in which there is no alternative to raising taxes starting from 2023.

The Bank of Israel's preferred alternative is to gradually raise taxes while cutting government expenditure according to the priorities that will be set by the government in 2023. The Bank of Israel says that financing the plan through debt would could a constant rise in the GDP to debt ratio because of the burden of interest payments, with costs rising as the plan proceeds, so that at some stage the government would need to raise the tax burden or reduce other expenditure, or both.

The plan requires that certain issues that were pushed aside even before the Covid-19 crisis be dealt with, such as reforms of education, infrastructures and reducing regulation.

Published by Globes, Israel business news - - on June 16, 2021

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