(photo credit: Ariel Jerozolimski [file])
The government approved Finance Minister Avraham Hirchson's economic reforms plan during Sunday's cabinet meeting.
The ministry's negotiation teams, financial organizations and the Histadrut planned to convene for the first time on Sunday evening. The talks would focus on how to best implement the reforms, while ensuring that all sides agreed on the changes.
Hirchson aims to introduce a negative income tax and other social reforms as a means of boosting participation in the work force.
The Finance Minister presented a five-point plan to be implemented by 2009, which will see the introduction of negative income tax, obligatory pension coverage for all workers and stronger enforcement of labor laws, such as adhering to the minimum wage and widening the subsidization of child care.
Offsetting the cuts in income tax revenues, Hirchson said the reforms would include raising taxes on company-owned cars.
The program is expected to cost NIS 1.2 billion annually, the Finance Ministry said, as subsidies for negative income tax will cost the government NIS 1b. per year while raising child care allowances for working mothers comes with a NIS 200 million annual price tag. The government expects to add NIS 2.5b. in tax revenues from the car reforms.
Government Budget Director Koby Haber said the cost would not affect the 2007 state budget.
Negative income tax systems essentially subsidize low wages by giving different amounts of money to workers whose earnings are beneath a given salary threshold.
The Finance Ministry said it would introduce its program in stages starting in the second half of 2008 in Jerusalem, Sderot, Nazereth and Ein Mahel, affecting an estimated 35,000 households in the initial stage. This will increase to include 220,000 households countrywide when it is fully implemented by the end of 2009.
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