Israel to increase taxes to pay Gaza war bill

The next Israeli government may be forced to raise taxes to fulfil the fiscal deficit that resulted from the Israeli war on the Gaza Strip last summer, Israel’s Walla news site has reported.

The website quoted a recent Israeli Central Bank report, which revealed that the next government may have to increase taxes over the next year by 8 billion ILS ($2 billion) in order to reduce the fiscal deficit.

The report points out that if the government does not increase taxes and reduce spending, the fiscal deficit is expected to reach more than 3 per cent of crude domestic product – double the target deficit set for the end of the decade.

“The Israeli government needs to increase taxes and cut spending by 20 billion shekels or $5.6 billion to meet the target deficit of 2.5 percent,” the governor of the Bank of Israel, Karnit Flug, was quoted as saying.

However, Finance Minister Yair Lapid opposed any tax increase on the grounds that it would hurt the public and the economy.

According to the report, Lapid needs to develop plans to raise the target budget deficit for next year from 2.5 per cent to more than 3 percent in order to accommodate the increase in military spending during the Israeli war on the Gaza Strip last summer.