Finance Minister Bezalel Smotrich presented his 2025 budget plan today. “I promise to do everything in my power to reach the deficit target of 4%,” he said. Smotrich outlined measures to achieve this, including a freeze on public sector wages, tax stamps and benefits and pensions, a higher income tax for the lowest tax bracket, savings of just 35 NIS in government ministries and the civil service, and simplification measures did billion.
“Inflation has increased more than we wanted”
He explained: “We are in the most expensive and longest war in the history of the State of Israel, with costs that will weigh on us for many years. The war began with a huge crisis of trust between the state and its citizens. I decided to restore trust.”
“I’ll tell you a secret. The deficit will increase in the next month. But it should be remembered that it is not increasing linearly and in the last quarter it will be close to the current forecast (6.6%). If there is a deficit by the end of the year, it will only be due to control of unexpected defense spending. nothing to lose I’m proud of the way we’ve led the economy and the results are good.”
Smotrich then spoke about inflation, “Inflation is higher than we’d like, but I guess it’s a temporary thing. I don’t see inflation flaring up, and it’s mostly on the supply side in real estate, for example, because there’s no workers, no fruits and vegetables.” , because there are no imports from Turkey, I do not believe that inflation will be high, but we may have to revise the growth forecasts downwards.”
Regarding the principles on which the 2025 budget should be built, the finance minister said: “We need security to restore the confidence of citizens as well as investors. I will not spare money to manage the current war. It will take time and we will say the price but there is no other way. .
In addition to freezing tax brackets, the Finance Ministry wants to merge the two lowest income tax brackets so that low-wage earners will be hit particularly hard by higher taxes. Those earning above NIS 7,010 a month currently pay 10% tax up to NIS 10,060 a month when income tax rises to 14%. Under the new plan, workers will pay 14% income tax on NIS 7,010 per month. According to the calculations of the Ministry of Finance, this step should increase the state’s income by 2 billion manats per year.
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Smotrich puts forward a restrictive 2025 deficit target
Histadrut is expected to oppose the plan
Another measure taken into account is freezing the salaries of hundreds of thousands of public sector workers and saving 5-8 billion manats. In this regard, the Ministry of Finance is expected to face stiff opposition from the Histadrut General Labor Federation, which has announced that it will no longer allow public workers to suffer more. In the early months of the war, the Histadrut agreed to a plan in which every worker in the economy would “contribute” one day of their “rest” pay to finance the budget for the reservists. The union then made it clear that it would not agree to further measures unless the government drastically cuts coalition funds and cuts non-essential government ministries. The latest clash between Smotrich and Histadrut chairman Arnon Bar-David will certainly not make it easier for the Finance Ministry to win the support of the Histadrut in its efforts to reduce the national deficit, but it could increase pressure on the finance minister. labor organization.
In addition, those who receive benefits and pensions from the state and those who receive the minimum wage will also suffer. The aim is to freeze the amount of payments in accordance with inflation (currently 3.2% per year) and other mechanisms established by law or previously signed contracts and not renew. These ice creams and others save about NIS 5.5 billion in government spending.
Globes, Israel business news – en.globes.co.il – published on September 3, 2024.
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