The Presidium of Israeli Economic Organizations is opposing the cabinet's economic plan for 2017-2018. In a detailed document distributed to government ministers, it calls on them to oppose some elements of the plan. Presidium members assert that parts of the plan will worsen the economic climate in Israel, without increasing productivity and economic growth.
Presidium chairman and Manufacturers Association of Israel President Shraga Brosh says that the proposed economic plan was formulated following a number of round table discussions with the participation of Histadrut (General Federation of Labor in Israel) chairman Avi Nissenkorn and Ministry of Finance director general Shai Babad. "The private sector organizations made dozens of proposals in these meetings likely to improve the business climate, accelerate growth, and improve the standard of living in Israel. Unfortunately, the Ministry of Finance has adopted none of these proposals," Brosh complained.
The Presidium's appeal to the ministers alleges that the proposed plan was not devised in the framework of a coherent economic policy. It called that plan "a collection of proposals by different units in the Ministry of Finance put under demagogic headings, which will increase the cost of doing business, while increasing the burden on the business sector." According to the latest World Bank figures, Israel has fallen to 53rd place on the Ease of Doing Business Index. The Presidium says that the private sector in Israel is working in one of the world's most difficult business climates, and that a trend towards moving investments overseas is being felt in all economic sectors.
Brosh therefore called on the government ministers to oppose some of the Ministry of Finance's proposals in its economic plan.
One of the items of the plan criticized by the Presidium is the elimination of the diesel fuel tax reimbursement mechanism by the Israel Tax Authority for operators of vehicle fleets starting in 2018 and slated for completion in 2026. This measure is projected to increase the cost of organized transportation to work and schools by 17%, and increase the cost of transporting goods and cargoes by truck. "Given that there are no alternatives to the use of the diesel fuel in the foreseeable future, this is a disastrous measure for the private sector," the Presidium's letter to the ministers stated. "The natural gas alternative for transportation is liable to be delayed for many years by bureaucratic and operational obstacles, such as adapting the weight of the trucks and driving distances to natural gas."
The business sector warns that while diesel fuel will become more expensive, natural gas-driven transportation has yet to be developed. The Presidium states, "To the best of our knowledge, a pilot with a few buses operated by natural gas is beginning only now."
The Presidium also warns that eliminating the diesel tax reimbursement will eventually increase taxes by NIS 3.5 billion, thereby damaging industry and dramatically increasing the cost of the basket of products.
The Presidium also cautions that the government plan for increasing the tax on compressed natural gas (CNG) by 2026 will substantially increase its cost and increase the current tax on it by 140%. The economic organizations participating in this appeal include the Manufacturers Association, the Israel Builders Association, the Association of Banks in Israel, the Farmers' Federation of Israel, and other organizations.
The Ministry of Finance said in response to the appeal, "We regret that the Israeli Economic Organizations is busying itself with demagogic slogans and matters of ego, instead of focusing on increasing productivity and economic growth. After many years of tax hikes and increasingly burdensome regulation and bureaucracy, there is a clear trend in the Ministry of Finance towards cutting taxes and reducing the burden of regulation. It is unfortunate that interested parties are opposing every effort by the Ministry of Finance to make things easier for people and misleading the heads of important economic organizations."
Published by Globes [online], Israel business news - www.globes-online.com - on August 11, 2016
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