Bank of Israel Governor Stanley Fischer said the government will have to raise taxes to finance spending after revenue projections were lower than originally planned.
“Revenue projections have turned out to be low,” Fischer, 68, said at a conference in Jerusalem today. ’’We are going to have to raise taxes in order not to have excessive deficits.’’
Fischer, who is in his second term overseeing Israel’s $245 billion economy, said that while no decision has been made regarding which tax to increase, the government is likely to be “particularly careful” about raising corporate taxes because it doesn’t want them to exceed the rates in other countries. The value-added tax may be a possibility, he said.
“Everybody is talking about an increase in the VAT and there may be other taxes that need to be raised in order to finance spending without having too big a deficit,” Fischer said.
The government deficit is estimated as reaching 3.2 percent of gross domestic product this year, compared with a target of 2 percent, as a result of the expected decline in revenue, Fischer has said.
Israel’s economic growth is expected to slow to 3.2 percent this year from 4.8 percent last year, the Organization for Economic Cooperation and Development said in May, stunted by the European debt crisis. Exports account for about 40 percent of the economy, and Europe is the country’s largest market.
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