Recommendations for far-reaching tax reforms including a sharp reduction in the income tax rate and the elimination of special “allowance benefits” and exemptions, was presented to Finance Minister Yehoshua Rabinowitz in a ceremony at the Treasury offices today. Rabinowitz, obviously aware of its contents before the 150-page document was formally presented to him, praised the recommendations and expressed hope that Histadrut would join the government and business in implementing the reforms “without delay.”
The initial reaction from the Israel Manufacturers Association and Histadrut was favorable, indicating that they would support the proposed measures. But many economists and financial experts have expressed fear that they would dangerously reduce the government’s income and create a mammoth deficit.
The tax reform report was prepared by a special committee headed by Tel Aviv University economics professor, Haim Ben Shahar. Rabinowitz appointed the committee following the devaluation of the Israeli Pound last October and other economic austerity measures undertaken by the government at that time.
COULD BE IMPLEMENTED BY JULY 1
Rabinowitz said today that if understandings were reached with the principal economic institutions of the country–the government, Histadrut and employers–the reform measures could be implemented by July 1. He conceded that the proposed added value tax, one of several indirect taxes that are supposed to compensate the Treasury for the reduced income tax rate, “will not be ready by then.” However, he said, “we hope to implement that (added value) tax by next October.”
A spokesman for the Manufacturers Association said the businessmen would have been happier had the Ben Shahar committee recommended a maximum tax rate of 40 percent of income rather than 60 percent, compared to the present 87.5 percent. He said the proposed reductions did not encourage investments. But altogether, the report’s concepts were acceptable, he said, adding that “it should be stressed that the success of the reform measures depend on implementing them as a package deal with no exceptions.”
Yeruham Meshel, secretary-general of Histadrut, also welcomed the recommendations but insisted that workers’ take-home pay should be larger and that tax collection procedures should be made more efficient to avoid evasion.
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