Knesset Approves VAT Increase With Lapid Absent

The Knesset passed a controversial one-percentage-point increase in the value added tax on Wednesday, but many members of the governing coalition, including Finance Minster Yair Lapid, failed to show up to support the measure.

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Lapid left the plenum before the vote to travel overseas in what TheMarker has learned is a private holiday.

The increase in VAT to 18%, due to go into effect on June 2, was supported by 45 lawmakers with 39 opposed. Nineteen coalition legislators were absent from the voting, some of them due to their opposition to the increase. Some of the lost votes were made up for by offsetting agreements with the opposition.

Among the ministers and coalition MKs who failed to appear for the vote were Amir Peretz (Hatnua), Likud Beiteinu MKs Miri Regev, Gila Gamliel and Orli Levy, Defense Minister Moshe Ya'alon (Likud) and Interior Minister Gideon Saar (Likud).

"Lapid is spitting on the middle class that brought him to the Knesset. I don't see now he can look his voters in the eye," Regev said before the vote.

Nissan Slomiansky (Habayit Hayehudim), the chairman of the Knesset Finance Committee, spoke in defense of the measures.

"The VAT increase is a difficult thing that hurts the middle class hard and the poorest even more," he told the plenum. "But what can we do when the government of which I'm a member inherited a NIS 40 billon [fiscal] holeand we need to fill it? The austerity measures are being imposed on everyone."

The VAT increase is part of a series of tax hikes and spending cuts Lapid is seeking in an effort to close a yawning budget deficit created by lower-than-expected tax revenues and spending commitments undertaken by Prime Minister Benjamin Netanyahu's previous government. The full 2013-14 budget is due be voted on by the Knesset next month.

Lapid was originally scheduled to attend an Organization for Economic Cooperation and Development conference in Paris on Tuesday but cancelled the trip at the last minute to deal with the coalition crisis surrounding the issue of drafting ultra-Orthodox Jews into the Israel Defense Forces. He was also scheduled to attend a meeting of the Knesset Finance Committee to deliberate the Business Concentration Law on Tuesday but failed to appear despite cancelling his travel plans.

Political sources criticized Lapid's absence from the VAT vote, with one anonymous source saying it displayed "a shocking lack of public sensitivity."

The treasury offered a variety of explanations for why Lapid was traveling. Micky Levi, the deputy finance minister and a member of Lapid's Yesh Atid party, told the Knesset plenum that Lapid was still attending the OECD conclave. Lapid's office, on the other hand, said he was flying to Paris to meet with the French foreign minister but later clarified that the meeting was on Friday.

"From Friday afternoon, Lapid will be on private holiday for 24 hours with his wife," a spokesperson said.

Speaking on condition of anonymity, an official in Lapid's office said the finance minister had no set agenda for his trip and that the meeting with the foreign minister had yet to be confirmed.

"We are also now trying to arrange a meeting with the secretary of the OECD, but it's not clear that it will happen," he said.