The government has submitted its sweeping income tax reform measures to the Knesset with the approval and support of large sections of the House and of public opinion. Finance Minister Yshoshua Rabinowitz said he hoped the complex of bills which comprise the reform would be speedily legislated so that the reform could go into effect next month.
Some economic observers doubt if this is possible, But all observers have become convinced of the government’s urgent intention to implement the reform without delay. Basically the reform will mean that all income will become taxable and the host of privileges, dubious “expenses” and fictitious exemptions will be abolished. Rabinowitz admitted that the “tax ethics” of the Israeli public had become sorely debased over the years and predicted that the new measures would introduce new standards of honesty. Rabinowitz explained that the root of the evil had been “the steep tax scale which has become aggravated by constant inflation that required a middle-income earner to pay a 50 percent tax rate all of which discouraged people from working harder and encouraged them to try to evade taxes.”
MORE TAKE-HOME PAY SEEN
Under the new system, persons earning IL 3000 will pay 25 percent income tax. Earnings over IL 6500 will be taxed at a rate of 60 percent. A sliding scale will govern earnings between those two parameters. Treasury experts predict that 72 percent of wage-earners and 51 percent of self-employed persons will pay no more than 25 percent tax, with a large number of this group paying no tax at all and some receiving added income from the National Insurance Institute. Only seven percent of wage-earners and 17 percent of self-employed persons would be paying more than 35 percent in tax, the experts forecast. The official forecast is that the vast majority of the population will find themselves with more take-home pay as a result of the tax reform.
The Treasury is presently putting the finishing touches to a second major piece of legislation, due to be introduced later in the year, an added value tax that is expected to soak up excess spending power and largely cover the IL 1,6 billion in revenues which the Treasury will loss as a result of the income tax reform. In presenting the income tax measures to the Knesset, Rabinowitz appealed “to my fellow countrymen” to save any extra money they find in their pockets as a result of the reform instead of spending it and thus firing the flames of inflation which, he warned, would force the government to take new stern measures, Likud’s chief economic spokesman, Yohanan Bader, said the tax reform was a victory for the opposition which had long been advocating reform. The present tax structure, he said, had become “an intolerable burden.”
The tax reform measure was drafted by Treasury officials on the basis of recommendations presented earlier this year by the “Ben-Shachar tax reform committee.” That group, headed by Tel Aviv University President Haim Ben Shachar, was charged by the government to review the entire income tax system and make proposals for its thorough overhaul. The government adopted the committee’s recommendations in full. They also won the blessing of the Histadrut and of the employers.
The Archive of the Jewish Telegraphic Agency includes articles published from 1923 to 2008. Archive stories reflect the journalistic standards and practices of the time they were published.
