In a press conference, Lapid said the decision was made after careful deliberation and will help the economy deal with stagnant growth rates.
"Despite the fact that the government approved a deficit target of 4.64%, we now believe that the deficit will be lower than 3.5%. We are saving hundreds of millions of shekels in interest alone. We've also exceeded forecasts in tax collection, partly due to earnings from trapped profits from the large companies. Government expenditure was also lower than planned."
The minister said that the fruits of this change can now be utilized to ease the lives of the Israeli middle class, "which is the one that drives the Israeli economy and brings growth, but does not get enough in return."
"It's our job not just to provide better education, health and social services but to do everything to increase the middle class' income."
He further stated that the government "needs to work harder for the middle class" not the other way around, and noted that the prime minister and central bank governor were all informed of the move.
The government will also reduce government expenditure by more than NIS 3 billion and will do everything to avoid tax raises in 2015, Lapid said.
Income tax was set to rise by 1% for those earning between NIS 5,280 and NIS 14,000 a month; by 1.4% for those earning between NIS 14,000 and NIS 20,000; and by 2% for salaries over NIS 20,000. It would have seen government revenue rise by NIS 4 billion.
The decision to cancel the increase was based on Treasury estimates that put the 2014 deficit at 3.3% of the GNP – 1.3% lower than expected.
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