Israel ‘celebrates’ Tax Freedom Day

Israel on Sunday passed its annual Tax Freedom Day, which indicates how much of the year is devoted to earning income that goes toward paying that national tax bill.

July 14, 2013 22:36
2 minute read.
An accountant [illustrative photo]

An accountant calculator taxes 370. (photo credit: Ivan Alvarado / Reuters)

Israel on Sunday passed its annual Tax Freedom Day, which indicates how much of the year is devoted to earning income that goes toward paying the national tax bill.

Tax Freedom Day originated in the United States as an accessible way to convey the national tax burden, but advocates of small government have spread the concept to numerous other countries.

The Jerusalem Institute for Market Studies (JIMS) calculated the date for Israel, noting that 54 percent of the nation’s annual income makes its way to the government’s purse.

“While we know that taxes are an inevitable part of living in a developed society, to think that on average 54% of our salaries go into the government’s coffers reveals a major problem with the system,” JIMS president Corinne Sauer said. The government needs “serious governmental fiscal reform,” she said.

Critics of Tax Freedom Day point out that the money paid for taxes does not disappear into thin air; it pays for a range of government services, infrastructure, defense, welfare, courts, hospitals and police.

The left-leaning Canadian Center for Policy Alternatives, in a 2005 study railing against its local Tax Freedom Day, said: "It implies that the goods and services that Canadians provide to themselves through democratically controlled institutions – such as police protection, highways, national parks, schools, disaster relief and medical services – do not enlarge their freedoms or enrich their lives.”

By lumping all the taxes into one average, said the study’s author, Neil Brooks, it was treating corporate and capital gains taxes the same as income tax and value-added tax, even though the various tariffs do not affect the average person the same way.

Under Israel’s progressive tax system, different levels of income could imply different Tax Freedom Days for Israel’s earners. Earners in the top 10% pay 64% of the direct taxes and 16.4% of the indirect taxes, according to the JIMS study. That means their Tax Freedom Day falls later in the year. The lowest rung on the ladder pays 6.2% of taxes.

For them, Tax Freedom Day falls early in January.

For a big-picture accounting, the measure can be useful.

The JIMS study examines where the various taxes come from, putting them in terms of calendar days.

“Individual income taxes represent 38 days work, compared to sales taxes that represent 44 days of work,” the study said.

“National Insurance Institute contributions account for 33 days, and, unfortunately, we also have to work 25 days for import taxes, 18 for corporate taxes, 15 days for local taxes, 12 days for health taxes and 12 days for fuel taxes.”

The largest tax, accounting for 44 days of work a year, was the value-added tax.

The study also gives a basic picture of how nations stack up against one another in terms of taxes. In the US, the landmark arrives in April. In Norway, like in Israel, it falls in late July.

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