Finance Minister Yuval Steinetz declared on Tuesday that a planned raise of 1% to Israel’s Value Added Tax (VAT), will be postponed by one month. Steinetz reached the decision following a consultation with Knesset Finance Committee Chairperson Moshe Gafni (United Torah Judaism).

A Finance Ministry representative said “the postponement of the raise in VAT will grant businesses time to update their accounting methods.”

Earlier, Gafni refused to convene the Knesset Finance Committee to discuss the matter of raising the VAT by 1%. According to Gafni, "War hasn’t broken out, and we don’t need to raise the tax immediately.”

The finance minister must formally consult the Knesset Finance Committee before the VAT tax can be raised, then the Knesset must vote to allow the raise within 14 days.

On Wednesday, Stenitz, and Bank of Israel Governor Stanley Fischer will present the government’s plan to the Knesset Finance Committee.

Last week, Fischer said that the finance minister’s steps, part of a move to raise income tax too, are "courageous and essential" for improving the budget situation in 2013 and support growth. The Bank of Israel will continue its monetary policy of maintaining price stability, economic growth and the overall stability of the financial system, he said.

Some new taxes, which will generate about NIS 1 billion per year, went into effect last week as well, including tax hikes on cigarettes and beer.

After five years of global economic crisis, Israel is joining much of the world in major government spending cuts and tax increases. On Friday, Prime Minister Benjamin Netanyahu called his provisions "measured and necessary" in the face of the global economic crisis.