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Modai’s Surprise Tax Moves Raise Ferocious Opposition

Finance Minister Yitzhak Moda’i sprang two surprise tax measures on the public Tuesday night and ran into ferocious opposition from the Histadrut labor federation.

The levies, a well-kept secret until now, are intended to help finance immigrant absorption. They were disclosed after gaining near unanimous support in the Cabinet from ministers relieved not to have to pare their own budgets any further.

One measure is a 2 percent rise in the value-added tax, bringing it to 18 percent. It is to go into effect some time before March 31, 1991.

The second is a 5 percent surtax or “absorption levy” that will be added to everyone’s income tax starting in January.

Together, they are expected to net the Treasury an additional $275 million toward reducing the projected budget deficit next year.

The new taxes mean in effect that Israeli wage earners will again be turning over more than half their pay checks to the government.

Histadrut threatened a general strike Sunday that would shut down the entire economy.

The labor federation only last month reached an agreement with the Treasury to accept an economic austerity package it disliked but admitted was necessary. Several constituent unions balked, but a threatened general strike was averted.

Histadrut leaders, kept in the dark about the new tax proposals, now feel betrayed. A strike seems likely, barring last-minute negotiations.

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