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Tax Reform Measures Approved

The Knesset today overwhelmingly approved eight bills implementing the government’s controversial tax reform measures retroactively from July 1, The most important bill, putting the reforms into effect, was adopted with a majority of 76 votes. Only the two Rakah Communist MKs voted against the reforms, and Meir Payil of the leftist Moked faction abstained.

The strong-support for the measure indicated that both the government and parliament consider the reforms urgent for Israel’s economic well-being and are resolute in their stand despite opposition from various sectors of the economy. The government now faces the task of convincing large numbers of wage earners and businessmen that they will benefit, not suffer as a result of the reforms.

The measures passed today were based on tax reform recommendations made by a select committee headed by Haim Ben Shahar, a leading-economist and president of Tel Aviv University, who was assigned the task by Finance Minister Yehoshua Rabinowitz.

They embody two main principles a reduction in the rate of taxation whereby a majority of tax payers will not be paying more than 45 percent of their taxable income; and the elimination of most exemptions. The latter provision has raised considerable controversy which the government will try to overcome. Many businessmen and professionals are demanding that expense accounts, car and telephone expenses paid by employers, which were hitherto exempt, remain that way. The Israeli Journalists Union has threatened a 48-hour strike if their expenses are taxed.

Another issue that has raised objections among wage-earners is the provision to reduce cost-of-living allowances to 70 percent of the COL increase and making the allowances taxable Histadrut said yesterday that it had assurances from the government that the take-home pay of government employes in July will not be lower than in June when the tax reforms were not in effect. Histadrut urged private employers to give the same assurances to their employes. The Manufactures Association said yesterday, however, that it could not make such promises because it did not know yet what sums of money were involved.

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