The government meeting last night broke up without ministers voting on the revised budget proposal for 2024. Various ministers expressed objections to the proposal, among them Minister of National Security Itamar Ben-Gvir, Minister of Economy and Industry Nir Barkat, Minister of Education Yoav Kisch, and National Unity Party ministers Benny Gantz and Gideon Sa’ar.
Sources at the Ministry of Finance said this morning that, because of the many disagreements, a decision on some of the reforms contained in the budge proposal might be deferred until the next government meeting on Sunday next week. For example, the plan for boosting the troubled real estate sector and the plan for dealing with the black economy in order to raise additional tax revenue will be delayed for now.
The disagreements are largely over the cuts that the Ministry of Finance seeks to make in ministerial budgets in order to redirect the money to the needs of the war and to rehabilitation of damaged settlements. Under the proposal presented to ministers, there would be a flat 3% cut in the budgets of government ministries, in additional to a NIS 3.5 billion cut in government programs, and a more moderate cut in money allocated to coalition parties, amounting to just NIS 2.5 billion out of a total of NIS 8 billion.
The most significant taxation measure in the revised budget is a 1% rise in the rate of VAT from 2025. Prime Minister Benjamin Netanyahu initially opposed a rise in VAT, but consented after the Ministry of Finance conceded on its plan to cancel the promised additional tax credit points for parents of children aged 0-3.
Governor of the Bank of Israel Amir Yaron participated in last night’s government meeting, and warned against irresponsible fiscal conduct. "The Israeli economy is basically sound, and has the characteristics required to prosper when the war ends as well. But this won’t happen automatically," he said. "It’s important to remember that economic growth rests first and foremost on a stable economy and investor confidence. Government policy in dealing with the welter of difficulties while maintaining fiscal responsibility will have decisive importance to the economy’s ability to recover from the effects of the war and to return to growth quickly."
Published by Globes, Israel business news - en.globes.co.il - on January 15, 2024.
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