Aides: Netanyahu to Freeze Tax Cuts, Possibly Raise Taxes

Planned tax reductions were part of Netanyahu's own tax-reform program from time as finance minister.

Prime Minister-designate Benjamin Netanyahu will freeze the tax cuts scheduled for 2010, a number of his aides and confidants said Wednesday.

The planned tax reductions are part of the multiyear tax-reform program, from 2005 through 2010, which was sponsored by Netanyahu when he was finance minister.

In a recent meeting between Netanyahu aides and senior Finance Ministry officials, the possibility of tax increases was also raised; the increases could come this year or next.

Due to the low level of tax revenues over the past 14 months, and forecasts for even worse tax collections this year, the treasury estimates that state revenues from direct and indirect taxes will be only NIS 160 billion for 2009. This is around NIS 40 billion below the official forecasts from August 2008 used in forming the 2009 state budget. Due to the elections the Knesset has yet to vote on the 2009 budget.

The next round of tax cuts is scheduled for January 1, 2010. Individual income-tax rates and corporate tax rates will both go down in the last stage of Netanyahu's five-year tax-reform package.

In addition, say his aides, Netanyahu will be forced to reach an agreement with the chairman of the Histadrut labor federation, Ofer Eini, on freezing the cost-of-living increases for public-sector employees agreed to last year.