Tax reform to hurt periphery towns

Int'l business information company says some communities will lose an average of NIS 1.8 million under new income tax reforms.

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February 15, 2008 06:14
2 minute read.

Each town and village that will experience reductions in tax benefits under new income tax reforms will lose an average of NIS 1.8 million, an international business information company said Thursday. The Israel Tax Authority plans to nearly triple the number of peripheral communities eligible to receive income tax benefits, from 167 to 457, as part of an effort to include frontline towns that have been harmed by unstable security conditions on the northern and southern borders. Other communities will cease qualifying for benefits, but will gradually be weaned off through a two-year program. As part of the expansion program, Sderot, Karmiel, Safed, Nahariya, Rosh Pina, Kiryat Arba and Sakhnin will become eligible for tax benefits, and as a result see an increase of NIS 1.5m. in income per community, according to figures released by the Dun & Bradstreet business information company. On the other hand, communities that currently receive tax benefits, such as Dimona, Kiryat Shmona and Tel Sheva, will suffer a decrease in income of NIS 1.8m. From a nationwide perspective, the 250 largest communities in Israel make an average of NIS 61m., Dun & Bradstreet said, adding that after the tax reforms, an overall increase of NIS 60,000 per community will be felt by taxpayers. Meanwhile, the Oscar Tax Return company said taxpayers in existing communities that qualify for benefits, and who will be harmed by the new model, are those who receive tax benefits of between 20 percent-25%. Kiryat Shmona, Mitzpe Ramon, Dimona and Yeruham are examples of such communities, Oscar said. Eligibility for the new benefits will be determined by three tests: measuring the community's socioeconomic situation, distance from a major city and proximity to an international border (without connection to any current security situation), Oscar's Noy Morag said. In an effort to personalize its figures, Oscar conjured affected taxpayers who will be affected by the changes, like Pnina, a Kiryat Shmona resident, who earns NIS 10,000 in her job as a tax advisor. Today, she is eligible to receive NIS 1,130 in tax benefits a month; after the reform, she will receive NIS 985 in benefits. Leah, a resident of Karmiel, one of the towns that will join the tax benefits club, is a senior secretary who makes NIS 7,000 a month. Today, she receives no tax benefits; after the reform will receive NIS 432 a month. Israel Tax Authority director-general Yehuda Nasradishi had earlier said planned reforms in income tax benefits would not harm the majority of taxpayers residing in the periphery.


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