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Slowdown in private consumption counteracts effect of tax hikes (illustration)
Slowdown in private consumption counteracts effect of tax hikes (illustration) 
 
'Obsolete economic perceptions.' Livni Photo: Moti Kimchi
'Obsolete economic perceptions.' Livni Photo: Moti Kimchi
 
'Netanyahu has failed in navigating Israel's economy.' Yachimovich Photo: Benny Deutch
'Netanyahu has failed in navigating Israel's economy.' Yachimovich Photo: Benny Deutch
 
 

 

Treasury posts budget deficit of NIS 39B

Centrist, leftist parties slam government for ending 2012 with deficit of 4.2% of GDP. 'Figures point to social hell and economic chaos,' says Yachimovich. Livni: Netanyahu leading Israel to bankruptcy

Ynet, Yedioth reporters
Published: 01.13.13, 20:15 / Israel Business

The Finance Ministry on Sunday posted a budget deficit of NIS 39 billion (about $10.5 billion) for 2012, making up 4.2% of gross domestic product – double the government target.

 

Prime Minister Benjamin Netanyahu's political rivals rushed to comment on the figures, revealed just nine days before the January 22 Knesset elections. Hatnua Chairwoman Tzipi Livni said that the "political irresponsibility and flawed priorities" of the Netanyahu government were "leading Israel to bankruptcy."

 

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After elections, austerity budget looms  / Reuters
Analysts believe new Knesset will need to cut spending by NIS 14-15 billion, raise taxes by as much as NIS 5 billion to keep deficit to 3.5% of GDP
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Livni accused Netanyahu of "preferring to pay sectors that bolster him politically instead of adopting a national list of priorities."

 

She added that the prime minister "insists on conducting himself according to obsolete economic perceptions which have failed all over the world. This proves that the increased burden on the middle class and the unbearable indirect taxes not only failed to benefit the state coffers, but actually caused damage.

 

"It's time for a government with a different set of priorities, which will remove Israel from its international isolation. A government with a national list of priorities focusing in the periphery rather than on (the settlements of) Tapuach and Yitzhar."

 

Labor Party Chairwoman Shelly Yachimovich said that "the data about the huge deficit demonstrate the social hell and economic chaos we are facing here if Netanyahu is reelected as prime minister, Heaven forbid.

 

"The deviation from the deficit serves as clear evidence that Netanyahu has failed in navigating Israel's economy. His economic boasting is shattered once and again on the ground of reality with figures of soaring unemployment, a dangerous extent of poverty, huge social gaps and a dangerous erosion of the middle class."

 

The Labor chairman went on to say that "once and again Netanyahu sets a deficit target he fails to meet. At the same time, he digs a deep hole which he plans to fill with the little money of the poor and middle class if he is reelected, Heaven forbid.

 

"If Netanyahu's economic errors continue, we will be in the same situation as Chile and Mexico, where there is a radical polarization between poverty and wealth."

 

'Middle class turned into Treasury's ATM'

The Meretz party commented on the Treasury's figures as well, stating that "in order to cut the deficit there is a need for a budgetary balance by reducing unnecessary spending and increasing income, without affecting the public sector, social services or allowances.

 

"In addition, we must curb the huge deviations in the defense budget, stop the settlement construction immediately, stop the special transfers to the settlements – beyond what they are entitled to as citizens of the state, stop the budget for the security of settlers in east Jerusalem, and set conditions for the transfer of budgets to haredi educational institutions.

 

Yair Lapid's Yesh Atid party said in response to the data that "the prime minister and finance minister's economic policy is collapsing in front of our eyes. The prime minister was wrong in thinking that raising taxes repeatedly would solve the deficit problem.

 

"In practice, imposing taxes on the middle class and small businesses only suffocates Israel's economy.

 

"Yesh Atid believes there is another way. Before the middle class is once again turned into the Treasury's ATM and small businesses are squeezed dry, cuts must first be applied to the budgets of haredim and settlements and the inflated and lavish government."

 

In July 2012, the government approved a 1% increase in the value-added tax and raised taxes on cigarettes and beer. These immediate steps, which joined a series of measures taking effect in early 2013, were meant to pay a sum of NIS 2 billion ($530 million) into the state coffers in as early as 2012, covering the huge gap between the planned income for 2012 and the actual income.

 

The figures posted Sunday reveal that the slowdown in private consumption counteracted the effect of the tax hikes, so that the State's income from taxes for 2012 totaled NIS 218.6 billion) ($58 billion) compared to NIS 109.3 billion ($29 billion) in the first half of 2012.

 

In other words, the income in the second half of 2012 remained similar to the first half despite the tax hikes, and the gap was narrowed by just NIS 500 million ($134 million).

 

Moran Azulay, Tzvika Brot and Roi Mandel contributed to this report

 

 

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