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Cabinet Approves Sweeping Program of Economic Reforms

The Cabinet today approved a sweeping program of economic reforms proposed by Finance Minister Yigal Cohen-Orgad which include sharp tax hikes for higher income brackets and reductions in government expenditures.

The goal of the program, according to Cohen-Orgad, is to slash the national budget by $2 billion and to brace the country for a period of high unemployment and economic austerity.

Most of the measures will remain in force for 10-15 months but the government has the option to extend them if the economic situation warrants. Several of them will take effect immediately. Others must be approved by the Knesset Finance Committee.

One of the most controversial among the latter is doubling the exit tax from $50 to $100 for Israelis who wish to travel abroad. That measure, originally proposed by Cohen-Orgad’s predecessor, Yoram Aridor, was blocked by the Finance Committee at the time.

ANNOUNCE OTHER CHANGES

Other changes announced after a lengthy special session of the Cabinet today raise the income tax rate from 60 to 66 percent for persons who earn 250,000 Shekels a month at the September Shekel value. Cohen-Orgad had asked for a 70 percent rate. The one agreed to was a compromise. Government officials said it would affect only one percent of the population.

Broader areas of the population will feel the bite of a new tax to be paid on child allowances to families of up to three children whose breadwinner is in the 50 percent tax bracket. A tax has also been levied on the income of pensioneers who take early retirement.

There will be a monthly 700 Shekel fee for families with children attending school and a cut in car allowances for civil servants. A health insurance tax was also approved but details were not immediately announced.

Government officials no longer deny that a rise in unemployment is imminent. One of Cohen-Orgad’s measures approved today will require job-seekers to accept any employment offered within a 60 kilometer radius of their homes, or lose unemployment pay benefits.

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