In accordance with the cabinet's decision, all ministries except for Defense and Welfare will face 2% cuts this year and 3% cuts next year.
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The budget also stipulates the increase of corporate tax by 1.5% starting 2014, the increase of VAT by 1% (thereby setting it at 18%) starting next month, and the charging of national insurance and health insurance from housewives. Furthermore, income tax will be raised by 1.5% by next year.
Netanyahu at cabinet meeting (Photo: Noam Moskovich)
Deliberations regarding the budget started Monday morning and continued throughout the day. The budget that was passed is expected to save the country some NIS 6.5 billion in 2013 and NIS 18 billion in 2014.
Prime Minister Benjamin Netanyahu said that cuts to the defense budget will be lowered from NIS 4 billion a year to NIS 3 billion.
"I believe the budget I'm offering today is giving the right balance between the needs of the economy and the needs of the defense,"
Once the vote was completed, Finance Minister Yair Lapid said that "approving the budget is the first step in changing life in Israel. Soon the law for equal share of the burden will be brought before the government and the housing cabinet will begin to implement a national program for housing which will lead to the lowering of prices.
"The budget will be accompanied by a series of measures that will include taxing large corporations that pay negligible taxes on their profits and forming reforms regarding the electric company and ports," Lapid said.
Lapid at cabinet meeting (Photo: Boaz Fyler)
Measures that would not be taking effect include the proposed shutting down of the courthouses in Nahariya, Beit Shean and Afula. The government had also decided against cutting funding to haredi education institutions.
Shas announced Monday that the finance minister would shelve his plan to cut funding to the ultra-Orthodox party's school system, in return for Shas following the guidelines of the Education Ministry, meaning the religious party would have to teach the core curriculum at its schools.
"This is a historic night. Haredi schools will be subject to standardized testing and core studies in order to gain funding," Education Minister Shai Piron told Ynet Monday.
The austerity measures have prompted national protests over the weekend, as some 12,000 protesters across the country took to the streets. "The elections in January were the biggest lie that Israel has seen over the past few years. Whoever expected changes got punched in the face," social activist Ofer Barkan said, adding that the government remained the same but that "cruelty toward the citizens has become worse."
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