Prime Minister Benjamin Netanyahu and Finance Minister Yair Lapid are expected to seek a 4% cut in the 2014 budget of most government ministries at Sunday’s cabinet meeting, as the budget-approval process heads into the final stretch.
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On Thursday, the Knesset Finance Committee gave the nod to the Economic Arrangements Bill, the supplemental legislation that accompanies the budget. The committee vote on the budget itself is due to take place on Monday. The provisions will then go to the full Knesset for final approval on second and third readings. At the request of the Finance Ministry, the plan could still undergo increases to the tune of NIS 100 million to NIS 300 million, due to final changes sought by MKs from the coalition and opposition. These amounts would not result in a greater budget deficit because the budget already provides for a budget line that would fund them.
At Sunday’s cabinet meeting, Netanyahu and Lapid are expected to seek a 4% cut ministry budgets to make up for the Knesset Finance Committee’s decision to scrap a provision that would have required stay-at-home housewives to make National Insurance Institute and health tax payments. The new cut is projected to generate NIS 596 million in savings, and will include a NIS 53 million cut to the Prime Minister’s Office, NIS 677,000 in cuts to the budget of the President’s Residence and NIS 17 million in reduced allocations to the Finance Ministry itself.
The 4% proposed ministry budget cut would not apply to defense, education and social affairs ministries or to the development budget of the Transportation Ministry. Due to the committee’s rejection of other provisions that would have generated new tax revenue, however, such as a tax on current homeowners who buy a new home in place of their current residence, the cabinet will be asked to cut the Education Ministry’s 2014 budget by about NIS 500 million along with a similar amount from the Transportation Ministry. If approved by the cabinet, the Public Security Ministry will lose NIS 111 million, the higher education budget will be reduced by NIS 48 million, the Foreign Ministry’s budget will decline by NIS 24 million, the Economy Ministry by NIS 52 million and the Housing and Construction Ministry by NIS 24 million.
The budget and supplemental legislation cover the balance of 2013 and all of next year. No budget was passed for this calendar year because elections were held instead in January, leaving the new parliament with the task of sorting out the country’s spending plan in the face of a widening budget gap. The budget and Economic Arrangements Bill must be approved by July 31.
The expected final vote by the Finance Committee on the budget tomorrow is scheduled to follow further consideration of the defense budget by the Knesset Foreign Affairs and Defense Committee on Sunday and Monday. Among the austerity measures that survived the Finance Committee’s review were major cuts to allocations to government ministries, drastic reductions in child allowances and increases in income and corporate tax rates. The committee also approved Tax Authority plans to close certain tax loopholes.
Sources at the Tax Authority are expressing satisfaction over the authority’s tax take for the first half of this year, which is meeting projections. Given the proposed tax measures in the budget for this year and next, the tax authorities expect to meet collection goals through the end of next year, but caution that an increase in the tax burden could also heighten the motivation of tax scofflaws. And next year’s projections are also subject to some uncertainty over the rate at which the local economy grows and the global economy recovers, they noted.
Among the budget provisions rejected by the Finance Committee was one requiring that both husband and wife exercise their earning potential in order to benefit from reduced municipal taxes, a provision which would likely have affected ultra-Orthodox men who engage in religious study rather than regular employment. Another provision would have imposed municipal taxes on cemeteries.
“We made history,” Knesset Finance Committee Chairman Nissan Slomiansky said of his panel’s work, adding that they had managed to head off a number of budget provisions that the Finance Ministry had been seeking. “We prevented serious harm to the middle class and weaker segments [of the population.]”