Netanyahu: If Elected, I Will Lower Tax Burden to 35%

Security and peace don't determine prosperity, says FM

Foreign Minister Benjamin Netanyahu yesterday outlined a series of proposed economic moves, including lowering the tax burden to 35 percent within four years, if he is elected prime minister.

In a speech to the capital market forum of the Federation of Israeli Chambers of Commerce's Financial Division, the Likud leadership candidate said that if he were to win the premiership, then he would present the Knesset with a new budget and initiate a new tax reform immediately upon taking office.

"I do not know any recession that was ended through imposing new taxes and decrees," Netanyahu said. "I know cases where a recession was ended by increasing the economy's degrees of freedom. Taxes should be cut, not raised. Tax on labor will reduce the incentive to work. This causes the economy to shrink and the contraction of companies, which become less competitive. Raising taxes means diving deeper into the recession," he added.

The foreign minister questioned the theory that restoring security and returning to the path of peace was the remedy for the economy's ills. "These are two different axes, each of which should be solved separately," he said. "For all their significance, security and peace do not determine a country's prosperity."

The foreign minister pointed to North and South Korea as two countries that have had a long-term political conflict. He said that due to differences in their levels of economic freedom, South Korea had achieved prosperity and growth, while North Korea had sunk into a deep recession. In the same context, Netanyahu compared the free economy of Taiwan with the tightly controlled economy of China.

"The levels of freedom in an economy are what determine the rate of growth," Netanyahu said, adding that even scientific progress, education and technology were unable to produce growth without a free economic policy.

Referring to New Zealand as a country with 50 million sheep and only 3 million people, the foreign minister said the country had achieved growth only after initiating a free-market economy.

According to Netanyahu, numerous steps are needed to increase growth, including centralization of activities at the Israel Lands Administration and the National Planning Council, which is part of the Prime Minister's Office.

"There is a need to stipulate alloted periods of time in which the institutions will have to accept building plans, and to amend the building laws," he said. "In addition, privatization must continue, and the shares of government companies and banks must be sold on the stock exchange ."

Netanyahu said that budget cuts and tax hikes were not solutions for the deteriorating economy, instead calling for tax cuts and increased investments. He repeatedly mentioned 35 percent as the optimal marginal tax rate ("according to numerous studies around the world") to ensure that the issue would be make the headlines. He also promised to provide additional economic headlines in the coming days.

Responding to questions from the audience, Netanyahu said that the real finance minister of Israel is the prime minister, the only person with the power to change policies. As prime minister, Netanyahu said, he would fight his coalition partners for increased investments in infrastructure, railway lines and roads.

The foreign minister did not mention funds channeled to the settlements and to the ultra-Orthodox sector as among his proposed cuts.