Budgets director rebuts: Elhanani's letter on 2003 budget is rife with inaccuracies

The Finance Ministry's budget director, Ori Yogev, firmly rejected claims raised by the legal counsel to the Knesset's Finance Committee regarding the ministry's budget proposal for 2003.

The gist of Smadar Elhanani's paper is that treasury claims about budget cuts approved by government are misleading.

"The letter is rife with inaccuracies and mistakes," Yogev wrote on the allegations to the Finance Committee, "and to prevent misunderstandings or, heaven forbid, unnecessary 'surprises' along the long road to approving the budget, I would like to set the record straight."

In his letter to Finance Committee chairman Yakov Litzman, Yogev adds that he learned of Elhanani's missive from the press.

The following are extracts from Yogev's letter.

• The economic adviser writes that that government made its decision on the 2003 budget without receiving an estimate for state revenues for 2003. On which Yogev says that in an extensive, nearly 12-hour, review, he presented the ministers with estimated figures for tax revenue in 2003, and discussed the effect of declining tax revenues in 2003 on income in 2003. "I assume the source of the misunderstand lies in the fact that the economic adviser was not present at the government meeting," he adds.

• Elhanani wrote that the 2003 budget decision was based on assumed economic growth of 1% in 2003, which she thought was "problematic". Yogev: "Problematic forecast? Does the adviser think the growth estimate should be higher? Lower? It isn't clear." An estimate of 1% is considered conservative by most economists in Israel, he adds.

• Elhanani claims that the 2003 budget, excluding debt repayments, is higher than the 2002 budget in real terms meaning, the vaunted budget cuts are pure hot air. To which Yogev claims: "The figures on which Elhanani relies are not relevant and not correct, since they do not factor in government resolutions on adjustments in the 2003 budget."

The correct figures, Yogev says, are:

The original budget for 2002 was NIS 200.1 billion, and the original budget for 2003 was NIS 196.4 billion a real drop of 1.8%.

If the tax reform, increased budget for infrastructure, drop in tax revenue and rise in transfer payments year-to-year are factored in, Yogev says, one receives an adjustment of NIS 8.7 billion meant to achieve a government deficit of 3% of GDP.

Yogev refutes other claims made by Elhanani namely that defense budgets will be reduced by NIS 3 billion, and that the manpower base of the civil service will be frozen, as the government resolved.

The treasury is now working on fleshing out the budget after its approval by the government, ahead of the Knesset debate on it, Yogev told TheMarker.

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