The defense budget will grow by NIS 6 billion in 2015, the plan for 0% for first-time home-buyers will be approved, and taxes will not be raised in the state budget for 2015. This is the outline that Prime Minister Benjamin Netanyahu and Minister of Finance Yair Lapid agreed at the weekend as the solution to their disagreement over next year's budget.
It also appears that the fiscal deficit target will be raised by more than NIS 9 billion, from 2.5% of GDP to 3.4%, there will be no budget cuts, and tax collection will be deepened.
The Ministry of Defense had demanded NIS 11 billion extra in the 2015 budget, while in the Ministry of Finance's proposal published at the end of last week, Lapid agreed to a raise of only NIS 2.5 billion under the "automatic pilot" mechanism applied every year (which includes salary raises, pensions, and so on).
Earlier last week, tension between the prime minister and the minister of finance ran high, with Netanyahu freezing Lapid's pet 0% VAT program, causing a coalition crisis. Lapid stood his ground and threatened to leave the government if it was decided to raise taxes next year and if the 0% VAT program was not approved. By Thursday, at a meeting of his Yesh Atid party, he was sounding more accommodating, and said that he did not intend to precipitate an election.
Lapid and Netanyahu are due to meet today to finalize their agreement.
Published by Globes [online], Israel business news - www.globes-online.com - on September 21, 2014
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