Economists slam Treasury's 'hypocritical policy'
Leading economists say government's plan to raise taxes an 'easy solution' that will backfire. 'It's as though social protest never happened,' says head of Macro Center for Political Economics
Leading economists leveled harsh criticism at the government's plan to raise the Value Added Tax and the Corporate Tax - which is collected primarily from small and medium-sized businesses that do not enjoy tax breaks - as a means of cutting the deficit, Ynet reported Monday.
Dr. Roby Nathanson, director general of the Macro Center for Political Economics, told Ynet that instead of taking advantage of the broad coalition of 94 Knesset members to "make serious changes and long-term plans to deal with Israel's many problems," the government is "once again choosing the easy solution – to raise taxes on the citizens."
"Instead of working harder to extract more funds from the large corporations, which are dodging tax payments by hiring expensive and sophisticated accountants and by promoting their interests (in the Knesset)," he said.
"It's as if the social protest never happened. The (government) is raising the VAT and directly hurting the weaker echelons and the middle class. (The government) is also acting in a hypocritical manner vis-à-vis the large (corporations). On the one hand they are raising the corporate tax, but they are also offering the large corporations discounts on dividends - thus giving up on NIS 25 billion ($6.4 billion) in potential revenue," he explained.
According to Ayalon Investment House chief strategist Yaniv Pagot, the proposed budget cuts show that the Treasury "has no rabbits in its hat. Again, the tax on smokers and alcohol drinkers will be increased, because of course it is a 'mitzvah' to target them, and once again indirect taxation will rise despite the harsh criticism that was recently voiced regarding the indirect tax rates in the State of Israel.
"It's much easier to cancel plans for a new road than to collect taxes from giant corporations or launching a plan to increase efficiency in the public sector and in state-owned firms," he told Ynet.
Pagot said he was particularly concerned with the government's plan to cut infrastructure budgets.
"Reports on the plans to reduce investment in infrastructure projects are indicative of a problematic national list of priorities. Israel must increase its deficit to support market growth," he said.
"Now is the time to enjoy the fruits of the speedy economic growth and the fiscal discipline the government has displayed over the past few years."
