Israel to increase tax as austerity bites | Al Akhbar English

Israel's government will raise income taxes as part of a series of austerity steps aimed at keeping the budget under control.

Despite increasing anger from the public, Prime Minister Benjamin Netanyahu and Finance Minister Yuval Steinitz have decided to increase income taxes by 1 percent on those earning more than the average salary of 8,881 shekels a month ($2,193) in 2013.

Value added taxes (VAT) were also set to rise to 17 percent from 16 percent on August 1, most ministries' budgets will be trimmed by 5 percent, and the tax authority is targeting tax evaders to collect billions of shekels. Last week, Steinitz ordered immediate tax hikes on cigarettes and beer.

Headlines in Israeli newspapers on Sunday called the steps an attack on the middle class, although Netanyahu and Steinitz said that without such measures, Israel's economy could collapse and suffer the same fate as southern Europe.

Bank of Israel Governor Stanley Fischer said on Sunday he supported the proposals to rein in the budget deficit, which has widened due to a tax shortfall stemming from weaker than expected economic growth.

"The actions of the prime minister and finance minister are brave and essential to improve our budget situation in 2013," Fischer, who had lobbied for tax hikes, said in a statement.

The finance ministry said the measures will add 14.4 billion shekels to state coffers next year.

Israel's economy is forecast to grow some 2.5 percent this year after 4.8 percent in 2011.

Two Israelis have set fire to themselves in recent weeks in protest at the right-wing government's policies.

(Reuters, Al-Akhbar)

Source: http://english.al-akhbar.com/content/israel-increase-tax-austerity-bites

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