The finance minister does nothing in half measures. Slashing the state budget isn't enough for him; he has to call it the greatest economic program since July 1985. Similarly, changes in income tax or national insurance are not just changes, but "reform," no less.
But what he is able to do and what he will bring to the cabinet meeting on Thursday is neither a grand economic program from 1985 nor tax reforms a la Ben-Bassat.
The economic program of 1985 was not a simple cutting of the state budget. It was a plan that saved the economy from disaster, bringing hyper-inflation to a halt and changing codes of conduct. It put a freeze on the possibility of the government printing more money and, thereby, changed the ineffective budgetary policy to an effective one. For the first time, monetary policy was put into force. So today, how can anyone mention the revolution of July 1985 and the currently-proposed series of budget cutbacks in the same breath?
The comparison with the Ben-Bassat tax reform proposals is also out of line. Former treasury director-general Avi Ben-Bassat and former finance minister Avraham Shochat wanted a comprehensive reform. They wanted to impose tax on capital, on stock trading, on savings and inheritance, while, with the other hand, reducing income tax on labor. This is a socio-economic revolution of the first order, falling hardest on the rich and making life easier for the workers. It has no connection whatsoever to the treasury's proposals of today, whereby the lowest-paid workers will pay a little less in tax, while the middle and top-income earners will pay a little more.
So one moment before he decides to raise income tax on workers, Finance Minister Silvan Shalom would do well to rummage around in his desk drawers, where he may come across a fresh report from the income tax department, which made recommendations along much surer lines - closing 20 loopholes.
Here are a few examples:
l Buying a loss-making firm: Any entrepreneur who buys a loss-making company can offset such losses against his profits elsewhere. This should be canceled.
l Temporary disability allowance: The legislature intended to afford tax exemptions to individuals with a 100 percent disability; but there are those that abuse the give-away for temporary handicaps so as not to pay tax. Cancel.
l Netanyahu exemption: If one generates income abroad, outside of one's usual line of work, one is exempt from tax; for example, overseas lecture tours by former prime ministers Benjamin Netanyahu or Ehud Barak. Change it.
l Inter-company dividends: An individual holding a company must pay 25 percent tax on dividends distributed. But if he owns a company that receives the dividends, instead of him personally, he doesn't owe tax. Absurd.
l Creating capital losses: Establishing a company that draws large dividends from a company that is purchased could create capital losses that would reduce the tax bill. Cancel.
The problem is that Shalom would have to stand up to several pressure groups; for example, the tax consultants or businessmen who exploit the loopholes to their advantage.
In any event, however, the money is there and the minister need only amend the law, stretch out his hand and take it.
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