Netanyahu: 'Taxes Might Not Be Lowered in 2009'

"We'll decide by the end of the year on a possible plan for cutting taxes, but it's not clear whether they will decline in 2009," Prime Minister Benjamin Netanyahu said yesterday when he and Finance Minister Yuval Steinitz met with financial reporters in Jerusalem.

Earlier in the day, at the handover ceremony at the Finance Ministry, Steinitz acknowledged the difficult tasks that lay ahead.

"The next few months will be filled with work," the new finance minister said. "In going over to a biennial budget we have assumed an enormous challenge and an enormous task. They will require supreme effort from all of us."

The ceremony was held a week after its counterpart at the other ministries because outgoing finance minister Roni Bar-On was in Britain on a mission for Israel Bonds.

At the press conference Netanyahu said he has not made any decisions on the size and nature of any tax cuts. "If we want to increase exports the main emphasis must be on making Israel more attractive abroad by cutting taxes," Netanyahu said. "Reducing taxes is essential."

The prime minister dismissed reports that he plans to lift the tax exemption on training funds (kranot hishtalmut). He and Steinitz said there will be no unilateral cuts in state-employee wages without the approval of the Histadrut labor federation.

Netanyahu said he did not promise any cabinet members that their budgets would not be cut. That answered the question of whether there was an understanding with Defense Minister Ehud Barak about leaving the defense budget alone.

Steinitz headed the so-called 100-day team, which among other things recommended extending state guarantees to foreign medical companies that invest in Israel. Steinitz told reporters, however, that as finance minister he is not bound by the team's recommendations.

"There are many instruments, and we will weigh the issue of extending assistance with great seriousness. We will consider the use of state guarantees to aid Israel's manufacturing sector" and increase employment, including giving aid to help exports, he said. Steinitz also promised to help solve the credit crunch.

"The state of our capital market is good. It should be strong enough to withstand shocks and support the economy with investments and exports," he said. "We will weigh all means - not only to protect the capital market, because it's in good shape, but also to encourage it to provide an answer to the temporary credit difficulties that hurt it."

The Round Table Forum, consisting of Netanyahu, Steinitz, Defense Minister Ehud Barak, Histadrut labor federation chairman Ofer Eini and president of the Manufacturers' Association Shraga Brosh, met for the first time yesterday evening.

The forum, stipulated in the coalition agreement between Labor and Likud, is intended to be a decision-making forum on economic matters. The group laid out its basic working principles yesterday. Netanyahu said the group will start meeting after the Passover holiday. He said the forum has an extremely important role: to protect Israelis' jobs.

The Knesset Finance Committee yesterday approved the government's proposal to vote on the 2009 and 2010 state budgets as a single package and to extend the deadline for passing the budget to 106 days, rather than the currently mandated 45 days after the establishment of the new government.

The bill will go back to the Knesset for second and third readings.