Lapid, Netanyahu
Lapid, NetanyahuFlash 90

In a move that is likely to further jeopardize his coalition, Prime Minister Binyamin Netanyahu on Monday suspended further discussion of the “zero VAT law" of Finance Minister Yair Lapid.

The news was unlikely to ease the already troubled relations between the two – quite the opposite, observers said.

The bill would allow first-time homebuyers to purchase apartments without paying the 18% value added tax, raising tension with the hareidi and Arab parties over the different breaks given to those serving in the IDF.

Discussion on implementing the zero VAT plan is to be suspended until an agreement is reached on the 2015 state budget.

Among the issues involved in the budget is how much to allocate to the Defense Ministry, with Netanyahu in favor of granting the Ministry the NIS 7 billion it says it needs to make up for the funds spent during Operation Protective Edge; Lapid is far less willing to give the Ministry the full NIS 7 billion it is demanding.

Taxes are another issue dividing the two. Netanyahu has shown that he has no aversion to raising taxes, having personally pushed for increases in the general VAT several times.

Lapid has sworn not to raise taxes, threatening to bolt the coalition over the issue. Netanyahu has indicated he would rather raise taxes than cut the budgets of ministries any further than he already has, but Lapid has adamantly resisted pressure to raise taxes altogether.

Netanyahu on Monday held a traditional toast ahead of the Jewish New Year (Rosh Hashana) for employees of his office, in which he called for a "significant increase" in the defense budget following Operation Protective Edge.

"Any responsible leader, in the face of the increasing threats around us, would demand and make possible a significant increase in the defense budget given the reality and the growing security challenges around us and this is what we will do, a significant increase of many billions," stated Netanyahu.