Knesset Approves Tax Portion of Trajtenberg Report on Socio-economic Change

New tax clauses, due to go into effect in Jan. 2012, expected to lower gas prices, adds fathers to existing tax breaks to mothers of children younger than 3.

The Knesset approved the tax portion of the Trajtenberg Committee report on Monday, in another effect of a tumultuous summer of social protests across Israel.

Among the amendments to Israels tax law is a monthly addition of NIS 418 to fathers of children under the age of 3.

Emil Salman

In the lead-up to the second and third vote on the bill, disagreement surfaced between Moshe Gafni (United Torah Judaism), chairman of the Knesset's Finance Committee, who asked the bill be expanded, and the Finance Ministry, who wanted to limit its scope.

Prime Minister Benjamin Netanyahu intervened, and ordered the coalition members to do whatever it took to have the law bill passed on Monday, which led to the final completion of the draft.

The new law will take effect starting January 2012. According to the Trajtenberg Committees recommendations the increase in the excise tax on fuel will be cancelled, costing NIS 2.5 billion.

From the point of view of the public, this decision means consumers will save 40 agorot per liter of gasoline, 20 agorot per liter of diesel and NIS 34 per ton of coal (affecting the price of electricity).

Tax cuts planned for next year are cancelled; instead corporate taxes will increase to 25% from the current level of 24%. The highest tax brackets tax rate will rise from 44% to 48% for those earning more than NIS 40,231 a month.

Men will receive two tax credit points per child under three years. This equals NIS 418 a month, or NIS 5,000 a year. Mothers already receive one tax credit per child under 18, and starting January 1, they'll be getting a second one per child under 5.

People who earn more than NIS 1 million a year will be paying a surtax of 2% on their income. Import duties will be canceled on all products that do not have a locally produced alternative.

Purchase taxes will be reduced in competitive sectors, such as electronics. Taxes on capital gains will increase from 20% to 25%.

Read this article in Hebrew: הכנסת אישרה: עוד 5,000 שקל לאבות לילדים עד גיל 3 ונקודת מס לאמהות