The Cabinet approved an IL 550 million cut in Israel’s IL 56,3 billion national budget for the new fiscal year yesterday but did not decide where the axe will fall. That matter will be left to negotiations between Finance Ministers Yehoshua Rabinowitz and his fellow ministers. Falling an agreement, the matter will be placed in the lap of Premier Yitzhak Rabin.
Each minister is jealously guarding his budget. The IL 550 million reduction that Rabinowitz recommended to the Cabinet yesterday was far lower than the IL 1.3 billion cut the Treasury had hoped for. The figure was reached only after hard bargaining among the ministers.
The budget reduction is required to balance the losses to the Treasury resulting from the new tax reform measures which, while closing loopholes and expanding the definition of taxable income, will substantially reduce the rate of taxation paid by Israelis, It was hoped that the proposed added value tax would fill the gap. But the government conceded yesterday that the October 1 target date for the new levy to take effect is far from certain,
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