Knesset Finance Committee Chairman Moshe Gafni (United Torah Judaism) urged the Treasury on Sunday to abandon its plan to raise the income tax for people earning over NIS 8,870 (about $2,200) by 1%, and instead increase the income tax collected from employees earning more than NIS 14,000 (some $3,500) by the same amount.
Gafni suggested that the Treasury make up the difference by increasing the corporate tax from 25% to 26%, as of January 1.
Finance Ministry Director General Doron Cohen criticized the proposal, saying the economy is experiencing a slowdown and that Israeli companies are in a "terrible situation" and would find it difficult to cope with such a tax increase.
"The (measures) are not draconian," he argued. "Life in Israel is not easy, but the tax burden (the government) wants to add is not heavy, and will not be felt at all in the lower tax brackets. We are talking about a minor increase."
Gafni said in response that Israel's taxation policy is "horrible" because the "indirect tax is very high while the direct tax is very low."
MK Fania Kirshenbaum of the Yisrael Beiteinu party, which supported the measures at a recent Cabinet meeting, said during Sunday's debate that the Treasury lacks vision and that Finance Minister Yuval Steinitz has no strategy. "(Cohen) promised to present a plan for the economy's recovery, but so far all we are asked to do, every few months, is to approve more (tax hikes and budget cuts)," she said.