2012: The Good, the Bad and the Costly

Better competition and budding consumer awareness will pay off, yet some basic necessities will be more expensive

More protests

Protests will be back in 2012, and how. What will be the spark? Maybe some bad corporate decision to raise cheese prices, or maybe some regulatory oversight that leads to a sharp price increase in something like electricity.

The conditions that led to last summer's protests are still here. Despite Prof. Manuel Trajtenberg's report into social and economic reform, the public will be paying even more for basic needs such as property taxes (arnona ) and transportation.

Toy 2012

That said, a monumental move such as the implementation of free public education from age 3 could delay the protest's return. (Oren Majar )

Dropping prices

Increasing competition and dropping prices are unquestionably a winning recipe for the economy as a whole and for us individually as consumers. Surprisingly, the government was the first to understand that 2012 would be the year of dropping prices. While businesses are waffling over price policies and debating whether the public hasn't forgotten the summer's protests, the government knows the answer.

Thus, despite corporate pressure, the Finance Ministry is kicking off the year on a particularly good note, slicing import duties on 700 products including ovens, refrigerators, stovetops, child strollers, suits and toys. Now all that's left to hope is that these cuts make their way through to consumers, and don't just stop with the importers and retailers.

Later in the year, we can also expect lower import duties on foodstuffs, and more action by the Antitrust Authority to increase competition. (Ora Coren )

Cheaper phone service

The year 2011 was a great one for cellphone customers. The average cellphone bill dropped by 30%, mostly due to the regulatory decision to chop interconnect fees that companies are allowed to charge customers for calling users in different networks. Then, in December supermarket mogul Rami Levi entered the market with the country's first virtual cellular operator, buying talk time from Pelephone but selling it to consumers at bottom-basement prices.

Now, in 2012 more changes are underway. At least five new cellular operators are scheduled to start offering their services, including virtual operators Five, Dor Alon's YouPhone and Home Center's hMobile, and Mirs and Golan Mobile with their own networks. If all these companies want to survive, they'll have to offer consumers attractive prices and service. (Amitai Ziv )

Cheaper TV

Multichannel television is consumers' second biggest expense, after communication. Until now, the market had been split by two players, HOT and Yes, which charge an average of NIS 220 a month.

But new players will be entering the field in 2012: IDB group company Cellcom, and competing cellphone company Partner. It's not that they particularly want to; neither HOT nor Yes are reaping major profits from their television operations. It's that they don't have a choice, if they want to be major communications companies and compete with the big boys. (Amitai Ziv )

Faster Internet

Israel isn't ranked too highly in terms of Internet speed: 54th in the world according to Netindex, which found that the average Israeli Internet user is surfing at 7 Mbps - half of the European average. The problem isn't with the Internet service providers, who are constantly cutting prices, but with infrastructure companies Bezeq and HOT. Two companies split the market, which minimizes competition and lets prices remain high.

But here, too, we'll be seeing more competition in 2012: Communications Minister Moshe Kahlon is pushing for a reform that would force Bezeq and HOT to sell bandwidth not just to private consumers, but to wholesalers, allowing for virtual infrastructure companies to pop up and compete with the big two - much like is happening in the cellphone market. Plus, plans are underway to let the Israel Electric Corporation launch its own Internet company, based in part on its existing infrastructure. (Amitai Ziv )

Faster trains

After years of aggravation, Be'er Sheva's residents can finally expect to receive fast train access to the center of the country this year. Once infrastructure work finishes on the track between Be'er Sheva and Lod in the second half of the year, traveling to Tel Aviv should take only 52 minutes.

Plus, plans are underway to offer 24-hour train service, speedier service between Tel Aviv and Jerusalem, less crowding and onboard Internet, the latter two made possible by new train cars. (Daniel Schmil )

New tax benefits ...

The only portion of the Trajtenberg report to receive cabinet and Knesset approval was that involving taxes. As a result, working fathers with children under 3 years will be getting an extra NIS 418 a month, which works out to NIS 5,000 a year. Working mothers with children under 5 will be getting another NIS 209 a month. People who earn between NIS 8,000 and NIS 14,000 a month will be paying marginal income tax rates of 21%, instead of 23%, saving up to NIS 108 a month. Women eligible for negative income tax - meaning, they're getting subsidies for working - will be getting 50% more.

Meanwhile, subsidized mortgages through the Housing and Construction Ministry will have interest rates of only 3%. Online purchases of up to NIS 1,200 will be exempt from import duties.

Plus, the increase planned for gasoline taxes has been canceled. (Moti Bassok )

... but not for all

But not all will be better in the new year, and that includes the Trajtenberg tax changes. In order for some people to pay less, some will be paying more. For instance, the plan to cut the maximum marginal income tax rate has been halted; instead, it will be increased to 48%, up from the current 45%. Likewise, corporate tax rates will be increasing from 24% to 25%, not decreasing. And capital gains tax will be increasing to 25%, up from 20%. (Moti Bassok )

Higher power prices

Israel lost one of its major sources of natural gas in 2011 due to the uprising in Egypt, and the result will be evident in electricity and water bills. Until Israel's new gas reserves go online - which isn't expected to happen until 201 - the Israel Electric Corporation is being forced to find more expensive energy sources. While electricity prices should be increasing 30% as a result, the government is likely to help delay the pain, increasing costs by "only" 10% for now. Water prices, which are partly set in relation to electricity prices, are expected to increase 2% accordingly. (Itai Trilnick )

Higher car costs

Car prices will be increasing this year due to rising exchange rates - cars from Japan are likely to cost NIS 2,000 to NIS 4,000 more, due to the strong yen, while those imported from South Korea (in dollars ) and Europe (in euros ) are also likely to cost more.

Plus, starting in February or March, taxes are expected to increase, including on environmentally friendly "green" cars. And leasing companies are expected to charge more, because the sharp competition is hurting their bottom lines - leasing a family car could start costing as much as NIS 2,400, up from the current NIS 2,000 or so. (Daniel Schmil )

Higher bus costs

Higher costs will be coming to public transportation, too, despite Manuel Trajtenberg's recommendations. Starting today, prices will be up 2% due to inflation and increased costs. Bus tickets within cities will cost NIS 6.60 instead of NIS 6.40, for instance, while monthly bus passes will cost NIS 256 instead of NIS 248. A small enough change, but it comes just six months after a reform lifted transportation prices in the center of the country by 10%. (Daniel Schmil )

More expensive plane tickets

Airline tickets can be expected to get more expensive around the world, and local airline El Al is jacking up prices starting on January 5. Long-haul flights to destinations in North America, the far east and Africa will cost $20 to $40 more, due to higher fuel costs. Foreign airlines operating in Israel are likely to raise prices, too, if they haven't already. (Zohar Blumenkrantz )

More pollution

The air won't be any cleaner this year: Even though the cabinet is expected to approve a national plan for fighting air pollution this month, and implementation will proceed on another plan for increasing energy efficiency, all will be affected by the lack of natural gas. As a result, the Israel Electric Corporation is being forced to resort to dirtier fuels, such as coal, and the government is expected to push to relax pollution targets as a result. (Itai Trilnick )