Bowing to a two-pronged attack from unions and employers, the Cabinet today agreed to cut its proposed payroll tax from 7.5 percent to 4 percent, and to begin it on April 1 instead of March 1. Finance Minister Yehoshua Rabinowitz himself recommended the cut to the Cabinet after a weekend of bitter and arduous debates between him and Histadrut and the Manufacturers Association. Both groups attacked the proposed tax as recessionary and as hitting particularly at productive industries (the government itself will be exempt from the employers payroll tax.)
Histadrut Secretary General Yeruham Meshei expressed his satisfaction at the tax cut. He hoped, he said, that in future such cases the Treasury would consult with Histadrut in advance; Rabinowitz refused to answer a reporter’s question as to whether his retreat would damage the government’s credibility. This was a “provocative” question, he charged.
The tax out leaves next year’s budget some IL half billion in deficit. The Treasury says it will recommend by mid-summer a new method of covering the shortfall. By then, observers point out, the recommendations of a committee of experts, presently reviewing the entire tax structure and expected to suggest wholesale reforms, ought to be in.
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