'Slow recovery.' Steinitz
Photo: Ohad Zwigenberg
Steinitz: We'll have to raise taxes
Finance minister says raising deficit target from 1.5% to 3% will project 'credibility and stability to the world'
The Knesset plenum on Monday passed the preliminary reading of a bill to raise the deficit target from 1.5% to 3% next year. After the vote, Finance Minister Yuval Steinitz said that despite the doubling of the deficit target, the government will have no choice but to raise taxes in 2012.
While doubling the deficit target will allow the government to increase the 2013 budget by NIS 15 billion (about $3.7B), this still would not cover the large deficit that is expected due to a drop in tax collections, which resulted in a loss of NIS 2.8 billion ($700M) in tax revenues.
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"There is a global economic slowdown. Europe is collapsing. The recovery is slower than we had anticipated. We are a part of the world and it affects us as well," Steinitz said. "Therefore, we've decided to adjust the deficit target to the difficult reality and set it at 3% - because not one economic expert thought it should remain at 1.5%."
The minister said he had consulted with bank governors and finance ministers from all over the world before setting the deficit target at 3%, which he said "is also the new deficit target in Europe.
"On the other hand," Steinitz added, "we wanted to limit the tax burden on the Israeli public."
The minister said, "I want to tell the Knesset and the people of Israel that we plan to reach this (deficit) target, but it won't be easy, because despite raising (the deficit target), we will have to levy taxes.
"Over the coming weeks we will be devising a proposal that includes a package of tax increases, as well as a certain tax cut. We will submit the proposal for the government's approval before the 2013 State Budget is approved in order to project credibility and stability to the world.
"I'm certain that if we continue to display fiscal discipline- and this sometimes requires difficult, unpopular decisions – we will be able to continue safeguarding Israel's economy and ensure that the citizens of Israel are not harmed by the catastrophe of the global economic crisis that is currently raging in Europe, the US and the rest of the world. This is why approving the deficit target and the measures that will lead to tax hikes are necessary," he said.
