Knesset Passes Tax-relief Measures

Israelis making between NIS 8,000 and NIS 14,000 a month will see a 2% tax break.

The Knesset approved the tax portion of the Trajtenberg Committee report yesterday, drafted in response to the summer's cost-of-living protests.

Fathers of children under the age of 3 were some of the big winners, gaining tax credits of NIS 418 per child per month. 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.

Trajtenberg and Netanyahu - Avi Ohayon / Prime Minister’s Bureau - October 2011
Avi Ohayon / Prime Minister’s Bureau

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 recommendations passed yesterday.

The new law will take effect starting January 2012. According to the Trajtenberg Committee's recommendations, the increase in the excise tax on fuel will be canceled, costing the government 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 ).

Those making between NIS 8,000 and NIS 14,000 a month will also see a 2% tax break.

Corporate taxes will increase to 25% from the current level of 24%. The tax rate will also rise from 44% to 48% for those earning more than NIS 40,231 a month.

People who earn more than NIS 1 million a year will pay 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, but taxes on capital gains will increase from 20% to 25%.