Economist Doubts Plan to Abolish 200 Shekel Note, Warns of Increased Poverty
Translated & summarized from Al-Shams by baba
Economist Omar Fandi of the Arab Economic Forum questions the effectiveness of abolishing the 200 shekel banknote, suggesting it won't stop crime and could increase poverty. He argues the move aims to boost tax revenue without addressing the fiscal deficit or spending priorities. Fandi warns that eliminating the note could disproportionately harm the estimated 900,000 Israelis without bank accounts and complicate issues for Palestinian banks. He advocates for reviewing government spending and implementing policies that encourage economic integration instead of increasing the tax burden on citizens and businesses.
The story in 5 lines · by baba
- Economist Omar Fandi doubts abolishing the 200 shekel note will curb illicit funds or solve the fiscal deficit.
- The proposal may increase poverty, particularly affecting the 900,000 Israelis without bank accounts.
- Fandi suggests the move is an attempt to increase tax revenue rather than address spending priorities.
- He warns that eliminating the note could worsen financial difficulties for vulnerable populations.
- Fandi calls for reviewing government spending and promoting economic integration instead of new taxes.
Omar Fandi, head of the Arab Economic Forum, has expressed skepticism regarding the proposal to abolish the 200 shekel banknote, arguing it will not effectively combat illicit funds and may exacerbate poverty. Fandi believes the suggestion is a move to find new tax revenue sources rather than addressing the root causes of the fiscal deficit and re-evaluating government spending priorities. He noted that the authority to issue or withdraw currency rests with the Bank of Israel, not the government or tax authority, and any consideration of the proposal must account for institutional powers and economic and social impacts.
Fandi stated that eliminating the 200 shekel note will not deter organized crime, as cash transactions can continue using other denominations or foreign currencies like the dollar and euro. He contended that the proposal fails to address the core issues and might prompt holders of cash to convert it to other currencies instead of ceasing illegal activities. This proposal emerges amidst broader discussions about the budget deficit and the government's efforts to boost tax revenues. Fandi cautioned that an increasing reliance on taxation could burden citizens and businesses, negatively impacting economic activity.
The abolition of the 200 shekel note could disproportionately harm segments of the population struggling with banking and digital services. Fandi cited data indicating approximately 900,000 Israelis over 18 lack bank accounts. These individuals include members of the Arab community, impoverished groups, and those facing restrictions in opening accounts or residing in areas with limited banking access. Reducing reliance on cash without providing accessible alternatives could worsen their financial and social difficulties. Additionally, Palestinian banks face challenges with accumulating large sums of shekel banknotes that Israel refuses to accept or deposit, a problem that could be complicated by the removal of the 200 shekel note.
Fandi linked the proposal to mounting public finance pressures, suggesting that the emigration of professionals, including engineers and doctors, could affect tax revenues. He criticized the trend of imposing additional taxes, asserting that the tax burden is already high and that increasing it for major revenue contributors could harm economic growth. He also pointed to recent tax measures, such as changes to corporate taxes and dividend distributions, warning that such policies could weaken companies' ability to grow and invest.
Fandi urged the government to review public spending priorities before seeking new revenue streams, highlighting the need for serious discussion on resource allocation, particularly concerning high military spending and other expenditures. He emphasized the importance of policies that encourage work and economic integration, facilitate bank account openings, and promote the use of formal financial channels, rather than measures that might increase poverty and push more people away from the banking system. He concluded that tackling the fiscal deficit and combating illicit funds require comprehensive economic plans, not actions targeting a single currency denomination. He warned that increasing economic pressure on vulnerable populations could deepen poverty instead of addressing its causes.
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