Israel Raises Taxes, Cuts Planned Spending in Draft Budget

Israel’s Finance Ministry proposed raising taxes and cutting planned spending in the draft budget for 2013-14 it presented today.

A copy of the plan the ministry sent by e-mail today set 2013 spending at 388 billion shekels ($109 billion). The budget for 2014 was set at 408 billion shekels. The ministry proposed the plans be brought to parliament for approval no later than June 10.

Israel’s Cabinet on May 5 approved Finance Minister Yair Lapid’s proposal to raise the budget deficit target to 4.65 percent of economic output this year, a level the central bank has said is high. Standard & Poor’s lowered the country’s local currency rating to A+/A-1 from AA/A-1+, citing “recent fiscal slippage.”

The financial daily Calcalist said the budget plan includes a proposed 1.5 percentage point increase in income tax across all brackets and an added 1 percentage point to value-added tax, bringing it to 18 percent. Corporate tax will also be boosted to 26 percent.

The Globes financial daily said the budget pares 7 billion shekels from planned spending, including public sector wage raises and defense outlays.

Spending in 2012 was 385 billion shekels.

To contact the reporter on this story: Gwen Ackerman in Jerusalem at gackerman@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net

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