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The Federation of Israeli Chambers of Commerce has called on the government to recognize child care costs as a tax expense, as a means of encouraging more women to participate in the work force.
"Increasing the number of second partners in a household who work will largely contribute to closing social gaps in Israel," said Uriel Lynn, president of the federation, or FICC.
"Particularly in the periphery areas, where women are a driving force of economic growth, and where there is opportunity for them to establish their own businesses, women would be happy to go out and work if the day care for children was subsidized."
Research conducted by the FICC, and presented in light of family day, today, February 28, showed that in 2004, some 1.3 million women were in the work force, representing a participation rate of 57.7 percent amongst women between the ages of 15 and 64. This was slightly below the 60.1% average for OECD (Organization for Economic Co-operation and Development) countries. The Israeli average for men was a 66.8% work force participation rate, compared to 80.3% average in OECD countries.
Israela Many, Deputy Managing Director for Economics and Taxes at the FICC, who carried out the research, said no formal application had yet been made to the government to introduce the tax write-off, but that the issue would be part of the FICC's economic stand when it presents its policy recommendations to the new government.
Meanwhile, Avital Shachar, executive director of lobby group The Israel Women's Network (IWN) said it has been calling for these tax breaks for some time now but to no effect.
"Women's organizations have fought for this for the last 20 years already, but never got further than just declaring their ideas," Shachar said. "In 2005, we tried something different and commissioned research group Giza to carry out a study, which found that a tax saving of NIS 600 per child would encourage approximately 50,000 women to either enter the work force or raise their position from part time to full time."
She noted that the data was presented to then finance minister Binyamin Netanyahu, who gave the go ahead to do a pilot in two cities - Arad and Bet Shean. One city would have the tax deduction and the other would subsidize the day care centers and at the end of the year they would compare the figures of women in the workplace to measure the impact of the project. As it turned out, the day care centers received a large grant from the government in 2005, which meant that the one pilot was not necessary, and Shachar noted that there also was disagreement as to whether Arad and Bet Shean were the most appropriate places to do the pilot.
"Areas with young couples and larger professional and educated populations, such as Ashdod and Modi'in, would be more suitable areas for such projects," Shachar said. "In the end, nothing happened in 2005 but we still strongly believe that it should be."
A spokesman for the Finance Ministry said the issue was still on the table and was being deliberated by the Justice Ministry to see how it could be implemented in the framework of the law, but that there were no new developments at this stage.
Jonathan Lipow, chief economist at Forum Consulting & Business Development Ltd. said, however, that under the current system, there was no way of implementing the tax break as there are no personal tax filings in Israel.
"Even if there were, the system would be built to exclude the target population," Lipow said. "It would be complicated to implement so people who are not familiar with the tax code would not be able to take advantage of it, and it would anyway benefit high income earners who are in the work force. Women who are entering the work force will in all likelihood do so at a low income level where they would not have to pay taxes."
The IWN program called for the upper third of women who earn enough to pay taxes to receive the tax exemption. Of the 40% of women who are in middle income households, the expense would come out of the main income earner's salary and the bottom third would benefit from a negative income tax program.
FICC figures showed that 1.3 million women were working in Israel, of which 34% have academic degrees, while 25% of the 1.5 million men working have degrees.
Currently, some 55% of the population is participating in the work force - either through employment or by looking for a job - as compared with the OECD average of 69%.