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Governor of the Bank of Israel: Taxes need to be raised to meet the budget challenge - Walla! Business and Consumerism

2019-12-17T14:14:00.185Z


Amir Yaron noted today that "If the government continues to carry out all its plans and commitments, and does not raise taxes, the deficit is expected to reach a dangerous level of over 4.5 percent ...


Governor of the Bank of Israel: Taxes need to be raised to meet the budget challenge

Amir Yaron noted today that "if the government continues to implement all its plans and commitments, and does not raise taxes, the deficit is expected to stabilize at a dangerous level of more than 4.5 percent of GDP"

Amir Yaron (Photo: Reuters)

The ceremony of the appointment of Amir Yaron to the incoming Governor of the Bank of Israel, attended by Prime Minister Benjamin Netanyahu and Finance Minister Moshe as the window of the President's House, Jerusalem. December 24, 2018 (Photo: Reuters)

The Bank of Israel Research Division's updated estimates show that the "business as usual" scenario is expected to rise in deficit and in national debt in the coming years. This is what emerged today from the lecture by the Governor of the Bank of Israel, Prof. Amir Yaron, at the 2019 Horwitz Conference in Jerusalem. According to the Governor, "If the government continues to carry out all its plans and commitments, and does not raise taxes, the deficit is expected to stabilize at a risk level of over 4.5 percent of GDP, and the debt-to-GDP ratio is expected to disperse by 2025 to around 75 percent. product".

According to the Governor, "these are significant orders of magnitude, and they do not include an addition that the government may decide on regarding the defense budget." In addition, the Governor mentioned that "in a slowdown scenario, which is unfortunately not unreasonable, the deficit and debt growth will be even more significant." Also meeting the deficit of 3 percent of GDP, Yaron clarified, "will not prevent continued increase in the debt-to-GDP ratio. Therefore, the government will eventually have to make a greater effort and stabilize the debt-to-GDP ratio."

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How to deal with the deficit? Yaron emphasized that there is room for efficiency in government ministries, but made it clear that civilian expenditure in Israel today (without interest) is very low in international comparison. He said, "The increase we have seen in civilian spending in recent years is a result of the government having to address the budgetary demands of the public. Therefore, there is a low likelihood that spending can be significantly cut without hurting the services most painfully."

Ultimately, Yaron determined, in order to meet the budget challenge, the government would have to work to increase its revenue. The Governor mentioned that the tax burden has dropped significantly in recent years and is relatively lower than the OECD average. How to increase revenue, and what taxes to raise? The Governor did not elaborate, but emphasized that "choosing the right revenue mix correctly will first and foremost eliminate exemptions that have no economic justification, and avoid as much as possible distorted taxes that would hurt incentives and productivity."

Source: walla

All business articles on 2019-12-17

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