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It also isn’t true, as Hirchson says, that “lowering VAT is necessary because the surplus from tax revenues will reach NIS 10 billion this year. We must return some of that money to the public.”
According to the finance ministry’s tax administration, the country’s tax surplus (the difference between planned tax revenues and the amount of tax actually paid) stands at about NIS 5 billion. Nor is there any leftover from VAT revenues; that real growth is about four percent.
The big surplus comes from direct taxes levied on wages and capital gains. Revenues from these taxes rose 18 percent this year.
If the finance ministry wants to give some of this money back to the public, a reduction in VAT isn’t going to work. It would be better to use the revenue to offset a negative income tax, or to slash taxes for the middle class.