PM presents plan for addressing tent protesters' demands

Prime Minister Benjamin Netanyahu's government on Monday revealed the makeup of the team charged with conducting a dialogue with tent protesters and unveiled the outlines of its plan for addressing the protesters' demands. The proposal includes a number of wide-ranging ideas which alter many of the key tenets of Israeli economic policy.

Israel Hayom

has learned that one of the plan's central proposals involves reducing the cost of raising children in Israel by making child-related expenses tax-deductible, while significantly expanding government funding for day care and nursery schools, along the lines of a plan proposed by the Committee on the Status of Women chair MK Tzipi Hotovely (Likud). The move would achieve two goals: increasing employment in Israel, which today boasts one of the lowest rates of OECD countries, and increasing the disposable incomes of young couples and working mothers.

The plan also includes a sharp reduction in sales and import taxes, along with a 2% reduction in the Value Added Tax (VAT). It will also freeze the salaries of senior public employees, possibly including senior officials at government companies and public corporations.

The wealthy would see their taxes raised, with two additional income tax brackets created for people earning monthly salaries of NIS 60,000 ($16,850) and NIS 100,000 ($28,000). The inheritance tax will also reportedly be up for discussion.

While the changes would require shifting billions of shekels, it will not exceed the existing budget. Changes would be paid for through cancelling the planned reduction of the corporate tax rate, which was scheduled for January 2012, eliminating a number of loopholes and distortions in the tax code (which would net NIS 5 billion), cancelling tax benefits on deposits to funds for employee training (kranot hishtalmut) and overhauling the Law for the Encouragement of Capital Investment (which is estimated to cost NIS 5 billion annually). Finance Ministry officials have tried to cancel that law for years, on the grounds that it did not accomplish its goals of population dispersion and development of the country's periphery.

The annual defense budget, which currently stands at NIS 60 billion, will not be increased in 2012, and may be subject to cuts in the future. The plan includes breaking up monopolies and cartels in order to increase competition and significantly lower prices in the food, communications, energy and electricity markets. The government is also considering reducting manufacturing incentives.

In addition, the government unveiled the makeup of its "Rothschild Team," which will negotiate with the social justice movement under the leadership of the economist Professor Manuel Trajtenberg. The 15-member team will include five academics and representatives of the private sector, eight external consultants and one cabinet member, Improvement of Government Services Minister Michael Eitan, who will be in charge of developing tools for public participation in the budgetary process. The team will conduct roundtable discussions with representatives of the protest movement and is expected to submit its recommendations to the social-economic cabinet in September.

"I wasn't too enthusiastic about taking on this role," Professor Trajtenberg admitted to Israel Hayom Monday, "but I was convinced that the prime minister is prepared to pursue far-reaching changes, and I am sure that the team will formulate solutions and policies that will bring about change."

According to Trajtenberg, the prime minister has agreed to shift the state's order of priorities, as well as introduce changes to the tax code. Of primary concern, however, is that the state not exceed its budget. "I am first and foremost an economist who is concerned for the Israeli economy. I will not lend a hand to an irresponsible breaking of the budget. We won't spill billions," said Trajtenberg. He added that his work is being coordinated with Finance Minister Yuval Steinitz, and that Finance Ministry officials will be an integral part of the team's work.

Regarding the protest movement, he said, "The protest is serious and therefore the solution needs to be serious as well. This is a mission which to this day has yet to be carried out on this scale. We have put together a team of people chosen for their social sensitivity, their ability to listen and of course their economic talents."

Among the prominent names are Prime Minister's Office Director-General Eyal Gabbai, National Economic Council head Professor Eugene Kandel, Finance Ministry Budgets Director Gal Hershkovitz, Finance Ministry senior economics advisor Dr. Avi Simhon and Deputy Bank of Israel Governor Dr. Karnit Flug.

Additional members include social entrepreneur Shahar Cohen, National Insurance Institute head Esther Dominisini. former Income Tax Commissioner Dr. Yoram Gabay, Israel Prize laureate Professor Pnina Klein, Tax Authority Director Yehuda Nasradishi and Gadi Frank of the Council for Higher Education.

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