Upload
august-peters
View
214
Download
0
Tags:
Embed Size (px)
Citation preview
Measures for Reducing the Deficit and for Coping with the Effects of the Global Economic
Crisis on the Israeli Economy
August 2012
The Crisis in Europe, 2012
2
FranceGrowth 0.3%
Spain Growth -1.5%
Great BritainGrowth 0.2%
Italy.Growth-1.9%
GermanyGrowth 1.9%
Portugal Growth -3.3%
GreeceGrowth
-4.7
Adverse effect on credit ratings Cut in rating outlook: Germany, Holland, Austria
Rating downgradeGreece -12Spain -5Portugal -5Ireland -4Italy -3France -1Austria -1
IrelandGrowth 0.5% Holland
Growth -0.5%
AustriaGrowth
0.9%
BelgiumGrowth0.0%
SwedenGrowth 0.9%
NorwayGrowth 1.8%
FinlandGrowth 0.6%
Rise in Global Risks
Deepening recession in Europe that is proving worse than the forecasts Great Britain – The GDP declined by 0.7% in the second quarter Spain – Forecasts have been lowered; an additional program of cutbacks
has been formulated Italy – Rating downgrade; an additional program of cutbacks has been
formulated Greece – Increasing difficulties
The crisis is felt even in the stable economies Moody’s has cut the rating outlook for Germany and Holland. In the U.S. – Significant slowdown in growth in Q2 2012 and stagnation
in the job market; the central bank (the Fed) and the International Monetary Fund have lowered growth forecasts
3
Yields on Ten-Year Bonds
Source: Bloomberg
Greece*
Spain
Italy
Israel
FranceU.S.
Germany
* Greece is on a separate axis – the yield in July 2012 stood at 26%.
Source: The Economist
The debt crisis in the Euro zone and the fiscal difficulties in the U.S. have caused a significant drop in the growth forecasts
Growth Forecast for 2012
5
MonthChange in ParticipationChange in
Unemployment
June v. January0.8%0.4%
67.7 (in thousands)19.4 (in thousands)
June v. Q4 20110.9%0.4%
79.8 (in thousands)18.8 (in thousands)
Change in Participation and Unemployment Since the Beginning of 2012
Required Policy
12
• Immediate steps to meet the deficit target for 2013
• Immediate steps to rein in the deficit in 2012
• Immediate steps to comply with the limit on expenditure in 2012
Significance of Failure to Take Immediate Steps
13
• Risk of reduction in the credit rating
• Increased financing costs
• Loss of market confidence
• Impairment of private sector funding sources
Severe financial crisis necessitating harsher steps
July 1: Government resolution to increase the deficit target for 2013 from 1.5% to 3.0% of GDP
1.5% of GDP = Increase of NIS 15 billion in the deficit, resulting in a reduction of NIS 15 billion in tax increases
Deficit Target and Additional Required Tax Collection
14
Required Measures
MeasureAdditional Revenue for 2013 in NIS Millions
VAT increase from 16% to 17%4,400Collection of tax on trapped corporate profits3,000Deepening of tax collection and fighting black money
2,000
One percent tax increase for wage earners earning more than NIS 14,000 a month
1,200
Increase in purchase tax on cigarettes and beer1,000Increase in employers’ National Insurance contributions
950
Two percent surtax on annual income above NIS 800,000
600
Adjustment of the green taxation formula for vehicles
400
Extension of the temporary order on purchase tax300
No index adjustment for the top three tax brackets300Total14,150
15
Key Challenges
17
Money laundering
Organized crime
False invoices
Concealment of assets
Fictitious imports and exports
Smuggling of funds abroad
Establishment of dummy corporations
Effective handling of the debt load
Proposed Bill for Fighting Black Money
18
Tax offenses as source offenses (in the Prohibition of Money Laundering Law)
Transfer of information to the Israel Tax Authority from the Anti Money Laundering Authority
Reduction in the amount of cash transactions between dealers (from NIS 20,000 to NIS 10,000 plus a 15% fine)
Proposed Bill for Increasing the Efficiency of the Tax Collection Processes
Expansion of debt collection powers
Tax offsetting between tax systems
Prevention of the concealment of assets
Piercing of the corporate veil – transfer of activity
19
Proposed Bill for Increasing Enforcement Efficiency
Withholding tax refunds to those who fail to file tax returns
Administrative penalties / financial sanctions (for incorrect reporting / false invoices)
Effective tax collection in assessment and appeal processes (fines for arrears from the assessment date and
bond in an appeal proceeding)
Supervision of the transfer of goods to prevent tax evasion (on entering Eilat and in transfers to the
Palestinian Authority)20
Trapped Corporate Profits
The temporary order will net NIS 3 billion
Trapped corporate profits
Approx. NIS 17 billion
22
Tax Brackets)NIS thousands per month,
2012 prices)
2007)Weighted for
changes in the tax brackets
20122013According to the
Bill
Up to NIS 5,20010.4% 10%10%
Up to NIS 8,88021.0%14%14%
Up to NIS 14,00030.2%21%21%
Up to NIS 20,00035.4%30%31%*
Up to NIS 41,83036.3%33%34%*
Above NIS 41,83148.0%48%48%*Recently raised from
45%
Income above Nis 67,00048%48%50%**
Income Tax Rates for IndividualsProposed Increase in 2013
* Plus freezing of linkage
** Including surtax 23
Examples of the Effect of the Changes in Income Tax
ManWoman with 3 Children
WageAdditional TaxAdditional Tax
4,000006,000008,00000
10,0000012,0000015,000494920,000999940,000352352
100,0001,0371,037
24