Knesset Gets Israel’s Budget; Government Proposes 20% Rise in Taxes

Israel’s Government presented to the Knesset (Parliament) today its 1966-67 budget, calling for expenditures totaling 4, 633, 000, 000 Israeli pounds (over $1, 500, 000, 000). It is the highest budget ever drawn up by an Israeli Government, exceeding the current budget by more than 10 percent. To raise the monies to be needed to cover the budget, the Government proposed increases of 20 percent in direct and indirect taxation.

Despite the high general budget, the Government has proposed a cutback in the development budget and reduced subsidies to agriculture and industry. The Government will also increase tariffs for certain services which it provides. Defense expenditures will rise, the budget shows, by almost 10 percent. The overall budgetary increase was caused. It was explained, by the rise in salaries paid to Government employes and by the expansion of health and education services provided by the Government.

With a drop in foreign resources, Israel will have to provide for more than half of its development budget, which will be reduced by 15 percent. Funds for development projects will come mainly from compulsory loans and through transfers of money from the general budget.

Israelis have been expecting for a number of weeks that a “tough” budget was in preparation, and the details revealed to the Knesset today confirmed all expectations. In addition to a rise in direct taxes, Israelis will also have to pay more for certain daily necessities like cigarettes and gasoline. The cost of automobile registrations and transfer fees are to be doubled.

GOVERNMENT CHOOSES ‘SEMI-AUSTERITY’ TO AVOID INFLATION

Although the average personal income tax will be increased by only 2 and a half percent, the actual rise will be much higher because the minimum taxable incomes will be lowered, while the pound’s purchasing power has fallen steeply in recent months. The higher income taxes plus increased corporation taxes and the compulsory loans will increase the Government’s revenue from these sources by 20 percent. Financial circles here said that the Government had to choose between inflation and “semi-austerity,” and chose the latter course.

Addressing the Knesset, Finance Minister Pinhas Sapir told the Parliament that the budget presented is one intended “to strengthen the basis of achievements, instead of increasing expansion. ” The budget, he said, would mean difficulties for the population. “But,” he added, “the economy has reached a point where the transition from a rapidly-developing economy to one of modern production can be made without undue hardships.”

Concluding his budget address, Mr. Sapir told the House: “The Government was faced with the alternative of printing money or raising taxes — and chose the latter course, ” hoping, thus, that “runaway inflation may be prevented. ” He also took the Israeli workers to task for what he called “low morale, ” criticizing “frequent strikes which threatened the country’s economy in the last year. ” “Unless working norms can be adjusted to compare with those in industrial countries,” he warned, “Israel’s economy will not progress.”