Average Israeli spent nearly half of 2011 working for gov't

Tax Freedom Day marks the first day of the year that Israelis begin to earn money for themselves.

By NADAV SHEMER
June 29, 2011 13:00
3 minute read.
Sweat shop workers sewing

Sweat shop workers-311. (photo credit: Courtesy)

If it feels like you worked half of this year just to pay all your taxes, new research has found you’re not too far off the mark. According to a report from the Jerusalem Institute for Market Studies, the average Israeli spent 182 days working for the government this year, which means that on Wednesday citizens finally started earning money for their own private consumption or savings.

“Tax Freedom Day,” or TFD, the date each year when people begin to earn for themselves, came seven days later for Israelis in 2011 than it did last year, the institute’s research found. In fact, had TFD fallen one day later, it would have taken Israeli taxpayers back to the situation they found themselves in every year from 1990 to 2009, when they worked more for the government than for themselves.

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The reason Israelis pay proportionately less tax today than they did in the last two decades is because of the impact of corporate and marginal income-tax reductions that were implemented years ago, combined with an increase in growth, Yarden Gazit, the paper’s coauthor, told The Jerusalem Post Wednesday.

“In the past few years we’ve been enjoying the results of reforms from the beginning of the last decade,” he said, adding: “I think now the impact of these reforms is beginning to fade off, so if we want to continue to enjoy the growth we have been enjoying, we’re going to need to continue to see these changes in policy.

“This trend in tax reduction has been halted by the current government. The plan was to continue decreasing the corporate tax, which so far hasn’t happened, and the value-added tax as well, and that’s why we’re one week behind on last year.”

Gazit said Prime Minister Binyamin Netanyahu had made a Facebook post about the institute’s research last year but did not back up his promise to implement tax reforms that would ensure Israelis continue to work less than half the year for the government.

Compared to other developed economies, Israel’s tax burden is still relatively high.

Among other countries where research was conducted this year, the United States celebrated Tax Freedom Day on April 12, the United Kingdom on May 30, Canada on June 6, Croatia and Belgium on June 10 and Italy on June 18. Only in Germany (July 8), France (July 16) and Sweden and Norway (July 29) was the tax burden higher than in Israel.

The US is a special case because of its smaller relative government expenditure, Gazit said, adding: “What one needs to take into account is the large deficit in the US that is not considered in [calculating] Tax Freedom Day. Otherwise the current year’s deficit is worth nearly 10 percent of the US budget, which would be equivalent to another 10 or 15 days [of tax payments].”

TFD is calculated by taking the ratio of total taxes paid by the population over net national income. In Israel the data come from the Central Bureau of Statistics and the Finance Ministry. In 2011 sales taxes represented 40 days of work, individual income tax 38 days, import taxes 22 days, corporate and local taxes 15 days each, health taxes 11 days and fuel taxes 10 days.

Gazit said he thinks most Israelis are aware of their high tax burden but are unaware that 35% of the total public budget, or 64 days worked per person, goes toward repaying interest and principal on loans the government took out in the past.

While Israel’s high tax burden is often attributed to the security situation, he said, Israelis only worked 25 days in 2011 to finance the defense budget, compared to 26 days for welfare and social services and 22 days for education.


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