Tax Hikes Don’t Save Israeli Budget

January 14, 2013 Taxation in Israel

Benjamin Netanyahu at press conferenceJERUSALEM – Despite the series of tax hikes enacted earlier last year, Israeli missed its tax revenue target by millions of shekels in 2012.

The Ministry of Finance of Israel has launched the year on a low note, releasing a new statement on January 13th which shows that over the course of 2012 tax collections in the country were below target and the national budget deficit was nearly twice as high as planned.

According to the Ministry of Finance tax revenues in 2012 were ILS13.7 billion below target, only reaching ILS 218.6 billion.

Government spending was also above target, reaching ILS 285.6 billion, compared to the original goal of only ILS 283.4 billion.

The reduced tax collections and the increase in government spending has led to budget deficit of 4.2 percent of the national GDP, compared to the government’s own deficit reduction goal of 2 percent.

The Prime Minister of Israel Benjamin Netanyahu has already commented on the level of tax collections in the country, saying that the unforeseen shortfall “will not have significant effect on the lives of Israelis.”

The government had hoped that national tax revenue levels could be boosted through several tax hikes, including an increasing VAT by 1 percent to 17 percent, enacting an extra 2 percent tax on high incomes, and hiking employment taxes.

At the time the tax hikes were approved, the Prime Minister of Israel described the measures as “steps to prevent us from entering into a huge deficit in an attempt to protect the Israeli economy and the jobs of Israeli citizens.”

Photo by Downing Street