The Knesset plenum passed a bill raising the VAT by 1% on Wednesday after a tumultuous debate with 45 MKs voting for the bill, 39 against and one abstaining.
The criticism of the contested bill intensified due to Finance Minister Yair Lapid's flight abroad and consequent absence from the vote, which drew fire even from the coalition benches.
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"Lapid is spitting in the face of his voters," MK Miri Regev (Likud) accused, and refused to toe the coalition line and vote for the bill.
"He's the one who said – the middle class, we'll not allow anything that will drive you to poverty. And then he raised the VAT," she said. "Where's the other politics? Where's the compassionate politics?"
Lapid presents haredi draft proposal (Photo: Ohad Zwigenberg)
Members of the opposition charged Lapid of caving in to lobbyists and abandoning the middle-class. MK Stav Shafir jibed at the finance minister by listing the alleged many times he capitulated to external pressures and suggesting that he would "fold once again – this time for Israel's citizens."
Labor Chairwoman and Opposition Leader Shelly Yachimovich joined in and slammed the minister and his fellow members of government and called them "cowards" and accused Lapid of raising taxes for "the only sector which has no lobbyists, no top-tier lawyers who come to the Knesset committees, no former Finance Ministry senior officials hired to argue its case.
"It has nothing, it's silent. You go there, delve into its pockets and impose the least just, least moral and least tax possible."
The VAT raise to 18% is only one part of the austerity measures proposed by the Finance Ministry for the Knesset's approval, meant to increase the State's income by NIS 13 billion annually.
The VAT raise is estimated to yield the State's coffers some NIS 4.6 billion in 2014.
The new tax plan also includes a comprehensive raise of the income tax by 1.5%, raising the company tax from 25% to 26.5%, abolishing various exemptions such as the tax exemption on retirement pension for high incomes, cancelling the income tax credit points for university graduates and other measures.
Raising the VAT is expected to bring about higher prices for consumer products, as business owners tend to roll their VAT costs to their customers.
The National Insurance Institute warned that the economic measures, including the VAT raise, will result in a sharp rise in poverty with 35,000 children driven below the poverty line.
Protesting against the bill and the austerity measures, 400 seniors demonstrated in front of the Finance Ministry in Tel Aviv. The organizers claimed the measures were especially damaging to the elderly.
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