Israeli cabinet approved on Tuesday morning the austerity budget for 2013-2014 that kept most of the proposed spending cuts and tax hikes, officials at the Ministry of Finance confirmed to Xinhua.

The new budget, designed to reduce the country's deficit that hit 11 billion U.S. dollars, includes cuts of five billion dollars on government spending and revenues of 1.4 billion dollars expected from tax hikes.

According to the new budget plan, income tax will be raised by 1.5 percent for all workers; in June, the value added tax (VAT) would be raised by 1 percent to hit 18 percent on all commodities; In January 2014, the corporate tax will be raised by 1.5 percent.

On Monday night, Israeli Prime Minister Benjamin Netanyahu decided that the defense budget would be cut by NIS 3 billion ( about 0.85 billion dollars) rather than NIS 4 billion (1.14 billion dollars), which was initially proposed by the Ministry of Finance.

Following the final vote, Minister of Finance Yair Lapid issued a statement saying that "approving the budget is the first step in changing life in Israel."

He added that soon the housing cabinet will begin to implement a national program which will lower the real estate prices among other measures to improve the people's livelihood. The new budget is now slated for the Knesset (parliament) approval and expected to take effect on August 1. Endi

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