Two highly controversial austerity measures — an education tax and a tax on old-age pensions — were approved by the Cabinet Sunday as the Knesset prepared for its final debate on the 1986-87 State budget package of which the new levys are a part.
The debate will open Monday and Premier Shimon Peres, who left Sunday night on a trip to the U.S., has warned that failure to adopt the budget could mean the end of the Labor-Likud unity coalition government. The budget was drafted mainly by Finance Minister Yitzhak Modai.
The new taxes were opposed in the Cabinet by three of his Likud colleagues — Housing Minister David Levy, Labor Minister Moshe Katzav and Minister of Science and Development Gideon Patt.
The education tax, approved last summer but never implemented because of lingering opposition in both Labor and Likud, will be set at $60 for one child and $120 for two or more children attending school. A Cabinet committee will work out exemption categories which are expected to include development towns and low income families.
The old-age pension tax will be a one-time levy applied to senior citizens with an income of over 800 Shekels a month apart from their pensions. A third unpopular measure, a tax on cars, was also approved by the Cabinet Sunday. It was introduced last year as a one-time tax but the Treasury has included it in the new budget package.
The tax is two percent of a car’s value. Given the very high sales tax and customs duty on cars, this could amount to a substantial sum for car-owners. It is expected to bring about $55 million into the State coffers.
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