Ringing Out the Old, Ringing Up the New

TheMarker surveys the changes Israelis can expect to see in their finances and at the cash register in 2017.

Shoppers taking bags at the checkout at a Tel Aviv branch of the Supercofix chain, March 2015.
Eliran Rubin

Supermarket: Fees for plastic bags – Israelis use more than 2 billion plastic bags at retail establishments every year. As of January 1, the bags that stores have been giving out at the cash register for free up until now will cost customers 10 agorot (about 2.5 cents) each. The fee, designed to reduce the use of the disposable bags, will be earmarked for a special fund at the Environmental Protection Ministry. It will not be charged at small grocery stores or at open-air markets.

Savings: Putting something aside for the kids – New government savings plan for Israeli children will see the government chipping in 50 shekels per month per child, for 2.9 million individuals up to age 18. Parents will be able to deposit 50 shekels a month, to be taken from the child allowance they already receive from the government.

The savings will be held in an investment or other banking account of the parents’ choosing and it will be available for withdrawal when the child is 18. The total sum should be between 12,000 and 40,000 shekels, depending on the amount deposited, the level of risk which the parents opt for and the financial performance of the fund. An additional amount of about 1,000 shekels is to be deposited in every child’s account so as to make the plan retroactive from May 2016.

The monthly amount the government deposits will be adjusted every year, based on the cost-of-living index. Withdrawal of the funds at age 18 will require the parents’ consent, but at 21, the money will be at the child’s disposal without parental permission.

Gross salary: Minimum wage to rise – The minimum monthly wage will rise to 5,000 shekels ($1,290), the third hike in the minimum salary since an agreement on the matter was signed two years ago. At the end of 2017, it will be increased again, to 5,300 shekels.

The salaries of President Reuven Rivlin, Knesset members and judges are also expected to increase in January – by 2.5% – because they are linked to the country’s average wage. On the other hand, the salaries of Prime Minister Benjamin Netanyahu and his cabinet colleagues, which are linked to the consumer price index, will not be going up.

Knesset members currently earn 40,525 shekels a month. In January, that is expected to go up to 41,452 shekels. Eleven Knesset members from the Yesh Atid party announced that they would donate their 927-shekel monthly increase to various causes.

Net salary: Changes to the tax rates – Individuals with gross salaries of up to 20,000 shekels will see a reduction in their taxes on January 1, while top earners will see their tax rates increase. For those with low and moderate incomes, the monthly savings should amount to between about 30 to 150 shekels. On the other hand, a taxpayer with a gross monthly salary of 60,000 shekels can be expected to pay an additional 200 shekels a month in income tax.

At the same time, the corporate tax rate will dip from 25% to 24%. All told, the changes in the income tax rate for individuals and in the corporate tax rate are expected to cost the treasury about 4 billion shekels in the coming year.

On the pay slip: more vacation – A law sponsored by Kulanu party MK Rachel Azaria will give workers another two days’ vacation a year. The first new vacation day was added in July; the second day will be given during the coming year. Employees with up to four years on the job and who work five days a week will get 12 annual vacation days instead of the 10 they previously received. Employees who work six days a week will get 14 vacation days a year instead of the 12 that they have been receiving.

State employees: opening up the application process – The internal application process for government posts that are open only to employees of a particular ministry will be gradually scrapped. The new system will open the application process to employees at other government ministries and possibly even to members of the public at large. At the same time, a pilot program will be launched that will give several ministries flexibility when it comes to personnel management. Regulations regarding the employment of university students will also be changing, enabling students to apply for positions that start after they graduate.

In January, state employees will be receiving the second installment of the 1,000-shekel grant they were promised. The workers include cleaning staff and security guards in the public sector, and the payments are a result of an agreement between the Finance Ministry and the Histadrut labor federation.

Pensions: higher contributions and pensions for the self-employed – There are 210,000 self-employed Israelis, but up to now, the government hasn’t required that they save for their retirement. Fully 40% of them don’t have pensions. As of January, however, the self-employed will be required by law to set aside pension savings. In an effort to ensure that they abide by the law, a system of rewards and punishments, in the form of benefits and fines, has also been introduced.

The Finance Ministry has recognized that some wage earners are treated differently when it comes to payments into different pension funds. The problem has been corrected with an amendment to regulations that bans such differential treatment.

Total pension payments have risen to 20.5% (including contributions by the employer and the employee), but the total increase was supposed to be coming from the employer. After the change had already been approved, the employers and the Histadrut intervened and it was decided to limit the increase so that the additional contribution would be just 1% higher; of this, 0.5% came last July and the other 0.5% will come on January 1. The employee portion of the pension contribution will be going up from 5.75% to 6% and the employer portion from 6.25% to 6.5%.

Developments overseas: gender equality, marijuana, etc. – In California a new gender wage-equality law will take effect next year in an effort to eliminate salary disparities between men and women. In a different vein, publicly traded companies in the U.S. will from now on have to report the ratio between salary earned by the corporate CEO and the median salary at the company.

When it comes to recreational use of marijuana, the substance will be legalized (gradually and in a partial manner) in California, Nevada, Massachusetts and Maine. In addition, in California, a blanket ban will take effect on using cell phones while driving. Drivers will be barred from even touching their devices.

And in 2017, Iceland joins the list of countries placing limitations on Airbnb, the web-based short-term rental site that matches homeowners and vacationers. The Icelandic law also regulates the payment of taxes on the rentals.

What won’t happen on Jan. 1?

In the past, it had been decided that if no other decision was taken, the retirement age for women in Israel would automatically go up from 62 to 64 on January 1, 2017 (although they can continue to work if they so desire). But the Knesset Finance Committee has decided to defer the change until July at the earliest.

On another front, an initiative to give workers longer weekends, which had been due to go into effect in January, will be deferred. It is to be given a rethink by the director general of the Prime Minister’s Office, Eli Groner.

With reporting by Moti Bassok, Tali Heruti-Sover, Assa Sasson, Israel Fisher and Zvi Zrahiya.