Lapid Wraps Up Series of Budget Talks Ahead of Meeting With Netanyahu

Last week, the new finance minister met with representatives of the Israel Tax Authority and Defense Ministry to hash out details of the impending two-year budget for 2013-2014.

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Finance Minister Yair Lapid and other senior ministry officials are expected to meet with Prime Minister Benjamin Netanyahu after the Passover holiday, which ends Monday evening, for an initial discussion of the two-year 2013-2014 budget.

On Friday Lapid, who took office as finance minister two weeks ago, wrapped up a series of meetings on the budget with top ministry officials and leading economists outside of the ministry.

The proposed budget is expected to call for total cuts of NIS 30 billion in government spending over the second half of this year and all of next year. Passage of the budget by the Knesset was preempted by January's election, and the government has been operating on pro-rata monthly allocations based on last year's initial budget.

Lapid's budget is also expected to provide a NIS 6 billion boost in tax revenue through the elimination of certain tax exemptions and imposition of new taxes. Before the meeting with Netanyahu, Gal Hershkovitz, director of the Finance Ministry's budget division, will meet with Harel Locker, director general of the Prime Minister's Office, to discuss the budget.

Tax Authority representatives told Lapid last week they would have a tough time reaching their initial tax collection target this year. The authority had been aiming to inject NIS 241 billion into the state coffers from taxes but according to data collected since the beginning of the year, it appears the target will probably not be reached. The state's combined tax take for January and February, after adjusted for inflation,declined 5.2% compared to the same period last year.

The Tax Authority has apparently adjusted its projected tax collectionfor this year from NIS 241 billion down to somewhere between NIS 233 billion and 237 billion. That's still higher than the NIS 218.6 billion collected last year by the state. The final tax target for this year will be set before Lapid's meeting with Netanyahu.

Lapid reportedly told Tax Authority heads that from now on they will have to take more energetic steps to address undeclared income and he is said to have expressed concern over tax evasion by the wealthiest Israelis. Although it's unclear how much black-market capital can be uncovered by the tax authorities, despite expanding its staff for this purpose, Lapid reportedly told tax officials that efforts to collect undeclared income could generate billions of shekels in additional tax revenue each year.

When up against wealthy citizens who can afford the best lawyers and accountants to find legal loopholes to avoid taxes, Lapid reportedly said, the state should not back down.

On Wednesday, Lapid held a lengthy meeting with Hershkovitz, the budget division director, and other division staff and was briefed on the structure of the proposed state budget for 2013 and 2014. The division staff told Lapid that, as has been the practice, the ministry should propose a two-year budget because of the limited time left this year. Lapid has apparently agreed, but the budget for 2015 is expected to be for only one year.

On Thursday, Lapid met with the new defense minister, Moshe Ya'alon, at the Defense Ministry in Tel Aviv regarding the defense budget for this year and next. The two ministers agreed to convene a working team with representatives from both ministries to come to an agreement on defense spending.

Lapid and Ya'alon agreed to look ahead to the country's long-term defense needs and take into consideration the state's current debt, which is higher than originally anticipated. They also agreed, however, that defense needs must be considered in the face of regional threats."

The Finance Ministry has been pressing to cut the defense budget this year and again in 2014, down from the NIS 60.5 billion that was spent last year. .

New Finance Minister Yair Lapid, the leader of Yesh Atid party, left, with his predecessor at the treasury, Yuval Steinitz.Credit: Oren Nachshon

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