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The draft state budget 2017-2018. The most important and interesting

Monday, August 8, the Ministry of Finance has published the draft state budget for 2017-2018. Editorial presents readers with excerpts from the most important and interesting parts 110-page document.

The draft defense budget of Israel 2017-2020

Many of the proposed paragraphs have little chance to be approved, the officials of the Ministry of Finance is well aware. Some paragraphs were deleted from the draft law before its official publication, after it was leaked to the media and received a strong negative reaction.

The size of the state budget in 2017 will amount to 454 billion 118 million shekels (before proposed changes), and in 2018 463 billion 628 million shekels.

Of these amounts of public debt service (interest payments on loans and commissions) will go 38,23 billion shekels in 2017 and (CBA) 39.98 billion shekels in 2018. To repay debt will be sent, respectively, 99,05 billion and 93,71 billion shekels.

Thus, the expenditure budget minus debt will be 316,9 billion shekels in 2017 and 329,9 billion shekels respectively in prices in 2016.

The state budget deficit in 2017-2018 proposed for approval at the level of 2.9%, and then gradually reduce it to 1.5% by 2023.

In recent years, every new law on the state budget has postponed the deficit reduction in subsequent years. So, according to the law on the state budget for 2015-2016, the budget deficit in 2017 was supposed to be 2.5% and in 2018 of 2.25%.

In explaining this decision, the Ministry of Finance refers to the sharp rise in the cost of the obligations assumed by the government under the coalition agreements, as well as significant investment in transport infrastructure and the agreement between the Ministry of Finance and the Ministry of defence on the restructuring of the defense budget.

Offered the amount of 70 million shekels, is designed to encourage the reduction of emissions of greenhouse gases, to be taken from the budget of the Jewish national Fund (KKL), reducing the budget of the ministries of environment, energy and Economics.

Proposed issue of bonds of the state railway company («Rakevet Israel») in the amount of 1 billion shekels in 2018, reducing to 1 billion shekels from the budget of the Ministry of transport in 2017 and 2018.

Recall that the first such step the government ran in 2014. Until then, all railway projects were financed from the state budget.

It is proposed to cancel the award of the Minister of the interior, reducing the 100 million shekels from the budget of the Ministry of internal Affairs. It is also proposed to reduce to 25.6 million shekels from the budget of the Ministry of interior for special municipal commissions.

Still MIA stayed in one of two ministries (the second – mineralogie) with a special budget, which the Minister had the right to distribute without any criteria.

It is proposed to abolish special allowances to local authorities in Judea and Samaria, spelled out in the agreements of Oslo (NIS 1 million per year) and allowances for expenses on security (10.3 million shekels a year), reducing the amount in the budget of the Ministry of internal Affairs.

It is proposed to reduce the budget of the national program to reduce dependence on oil to 65 million shekels per year in 2017 and 2018. The original program budget, as approved in 2011, amounted to 150 million shekels a year until 2020. However, each time the state budget was approved reduction of funding of the program for the current year. So, in 2015, the program received 55 million shekels, and in 2016 – 60 million shekels.

It is proposed to reduce rates of 150 management staff of the prisons SERVICE in 2017, and 50 rates in 2018, reducing, respectively, 30 million shekels from the budget in 2017 and 10 million shekels from the budget in 2018. The proposal arises from the tendency to reduce the number of prisoners in Israeli jails.

It is proposed to reduce the 5 million shekels from the budget of the Ministry of economy on the maintenance of reserve stock of goods in the event of an emergency.

It is proposed to reduce the disposable budget of the program «City without violence» on 30 million shekels. In this case we are talking about the surplus, resulting from the under-utilization of budgets of previous years. For all years of the program’s existence (since 2006), its budget has never used more than 50%.

It is proposed to reduce the expenses of ministries to ensure security for 10 million shekels. The reduction is proposed due to the active introduction of new technologies for the training of guards, the purchase of which is proposed to spend 9 million shekels in 2017.

It is proposed to limit the increase in the budget of the Ministry of education 620 million shekels a year in relation to the 2016 budget. In the section notes the low efficiency of using existing MoE budget (according to OECD).

It is proposed to withdraw from the cash management of airports surplus of 1.19 billion shekels in 2017 and the same amount in 2018. At the same time it is proposed to exempt the office from paying its share of costs for the work of border crossings in the period from 2018 to 2027.

It is proposed to reduce by 2% the state budget for 2016 and 2019. As the state budget, according to the rules, is based on previous state budgets, the budget sequestration in 2016 and automatically reduces the budgets of 2017-2018. In 2019 it is proposed to hold an additional reduction of 2% because it is already clear that taken on by the government long-term liabilities will exceed the maximum allowed size of the budget in 2016.

It is proposed to reduce the budgets of the ministries for training by 30%. The reduction will save over 37.6 million shekels a year.

It is proposed to conduct an audit of computer systems and departments of all government agencies with the aim to reduce costs by not less than 20% while increasing efficiency by not less than 20%.

It is proposed to reduce the maximum state participation in financing the programme «Masa» with $ 50 million to $ 25 million.

It is proposed to increase the frequency of replacement of public vehicles, updating it every four years instead of every five years. A thorough analysis of the costs of the fleet showed that the increase in operating costs and decline in selling price of the vehicle does not justify the fifth year of his detention.

It is proposed to amend the agreement between the state and the Jewish national Fund (KKL) so that the Fund transferred to the state 750 million shekels instead of 1 billion shekels before October 1, 2016, to 1.05 billion shekels instead of 800 million shekels to 1 June 2017 and 1 billion NIS up to 1 June 2018. This paragraph is subject to the approval of changes in the governing bodies of the CCL. In the case that changes will not be approved, the Minister of Finance will have the right to hold the sequestration of the budget for 2017-2018 1%.

It is proposed to make changes in the decisions of the defence Cabinet «Beth/15» and «Beth/64»related to national security. Accordingly, to return to the state budget of 180 million shekels. The explanation of this paragraph is classified.

It is proposed to amend the tax ladder the income tax as follows:

– Up to 72 thousand shekels per year – 10% tax
– 72.001-115.200 shekels – 14% tax
– 115.201-172.200 shekels – 21% tax
– 172.201-223.200 shekels – 31% tax
– 223.201-496.920 shekels to 34.5% tax
– Each of the shekel – 47% tax
– Persons whose total income exceeds 639.996 shekels a year, to levy an additional tax at the rate of 3% per year per shekel in excess of this amount.

It is proposed to reduce tax on profits from 25% to 24% in 2017 and up to 23% in 2018.

As part of the coalition agreements with Yisrael Beiteinu party proposed to increase the allowance to the subsistence minimum for the elderly 350 million shekels in 2017 and another 200 million shekels in 2018; increase the size of one-time payments to Holocaust survivors receiving benefits at the subsistence level, with 3,600 shekels a year to 4.160 NIS a year (the cost for the budget – 50 million shekels per year). It is also proposed to cancel the decision to consider the German rent received by Holocaust survivors as income when calculating the benefits a living wage.

It is proposed to authorize the Minister of transport to cancel the liability of the General security service (Shin bet) for the provision of flights by foreign airlines to Israel on behalf of Israeli airlines. Evaluation of the Shin bet, the threat of these aircraft is no different from the threat of regular flights of foreign airlines in Israel. This step will allow you to save some 40 million shekels per year.

It is proposed to grant the national insurance Institute («bituah Leumi») tools to improve the efficiency of debt collection from employers who violated the law on social insurance. According to estimates, the proposed measures will allow to increase revenues «bituah Leumi» 50 million shekels a year. The appropriate amount proposed to be slashed from the budget allocations of the Ministry of Finance.

It is proposed to transfer control of funding for all rates of alternative service for national minorities under the control of alternative service. It is also proposed to increase the efficiency of the allocation of substitute service representatives of national minorities. Estimated savings for the state budget – 25 million shekels a year.

It is proposed to reduce the 40 million shekels from the budget of the Ministry of ecology, starting in 2017. The reduction will be offset by unrealized funds (over 1 billion NIS) accumulated in the Fund for the preservation of purity.

It is proposed to amend the law on compensation for the seizure of land as follows:

– Compensation for the period from the date of retirement until July 4, 2012 – the market price of the land lease for a specified period.
– Compensation for the period from 4 July 2012 until the entry into force of the amendment of 5% of the value of the property at the time of seizure a year.
– Compensation for the period from the time the amendment enters into force, the market price of lease of land for a specified period.

This amendment will have a retroactive effect and apply to reporting in the courts. The purpose of the amendment is to prevent potential claims payment of compensation for a total amount of 4.5 billion shekels, against the Supreme court rulings of 4 July 2012 on the claim of the Fund name, Jacob Hytner.

Proposes to tax owners of three or more units a tax equal to 1% of the purchase price, but not more than 1,500 shekels a month, for third and every next apartment. The owner of the apartment shall be the person owning 33% or more of the rights to the apartment. Spouses and children under the age of 18 living together, are considered a single owner (if children are married). Estimated income to the budget of 800 million shekels.

It is proposed to prohibit the employer to withdraw from the pension Fund money transferred to the account of the employee as compensation for dismissal. Requested to acknowledge the contributions of the employer to the pension Fund on the purpose of the payment of compensation for dismissal as income subject to taxation, if paid with salary net exceeding three average salaries in the country. This step should bring the state coffers 680 million shekels.

It is proposed to reduce the budget financing of elections in local authorities for 225 million shekels in 2018 and 40 million shekels in 2019.

To amend the rules of taxation of the kibbutz members as follows:

Member of the kibbutz will pay contributions to the national insurance Institute in accordance with his status (salaried employee, self-employed, student, etc.).

– Payments from the national insurance Institute will receive the member of the kibbutz, not the Secretariat.

Member of the kibbutz will pay income tax individually on a formula established in the act.

Projected revenues to the state Treasury of 300 million shekels. Revenues to the Treasury of the national insurance Institute – 200 million shekels.

Offered from 1 January 2017 to impose the insurance company special tax on income from health insurance, and health insurance Fund – income from membership fees for the additional insurance program. Tax rate – 3% in 2017, 6 percent in 2018, and 9% in 2019 and beyond.

This tax will be levied by the national insurance Institute and transferred to the funding of the basket of subsidized medicines.

It is proposed to increase the budget of the basket of subsidized medicines for 500 million shekels per year in the period from 2017 to 2019. Of this amount, 50 million NIS per year will be allocated for financing the genetic scan.

It is proposed to postpone the entry into force of the long school day for five years. Saving 2 billion shekels a year.

It is proposed to include management of securities in the list of entities with access to the database of the office for combating money laundering.

Proposed amendments to the tax code to combat tax evasion and close tax loopholes». In particular, it is proposed to repeal the exemption from reporting income abroad to new immigrants and returnees within 10 years after arrival in Israel, with the possibility of extending the exemption to 20 years.

The cumulative effect of the 18 amendments is estimated at no less than 300 million shekels in tax revenues.

It is proposed to accept the recommendations of the Commission for regulating the market of legal gambling and the distribution of income from it.

In particular, it is proposed to limit the volume growth of 2.7% in the year to reduce advertising expenses to 2.25% of the turnover in 2017 and to 1.75% by 2019, reduce the size of payments to distributors of up to 5% -7.5% in 2017, to increase the tax on the gain up to 35%.

In addition, it is proposed to transfer to the state budget of 250 million NIS in 2017 and 2018 means of control of sports betting and 500 million shekels from the state control of the lotteries.

From 1 January 2017 in the activities of the state administration of lotteries («Mifal’ a-Pays), and from 1 July 2017 – in the events management of sports betting, where the amount of possible winnings in excess of 5 thousand shekels, the participant will be required to present identifying an identity whose data will be encrypted on the ticket.

It is proposed to allocate the Prosecutor’s office and police 20 million shekels for the program to combat illegal gambling.

Material prepared by the economic observer Mikhail Shafranov

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The draft state budget 2017-2018. The most important and interesting 10.08.2016

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