Knesset to debate tax hikes to rise by 1%

If passed, VAT will rise one percentage point to 17%; Finance C'mtee reject Gafni proposal to raise corporate tax; Treasury General says "only a marginal increase."

MK Moshe Gafni (UTJ) 311 (photo credit: Marc Israel Sellem)
MK Moshe Gafni (UTJ) 311
(photo credit: Marc Israel Sellem)
The government’s NIS 14.15 billion austerity package will be the subject of a special Knesset session Monday afternoon, after the Ministerial Committee on Legislation approved the package Sunday.
Should it pass the Knesset, Value Added Tax (VAT) will rise by one percentage point to 17% on September 1.
Above-average income will be taxed an extra 1% and all income above NIS 67,000 per month will be charged a 2% surtax from January 1, while the green tax, purchase tax on investment apartments and employer contributions to the National Insurance Institute will all be updated.
Labor Chairwoman Shelly Yacimovich slammed the ministerial committee for supporting an emergency order waiving the income-tax debts of a number of large multinational corporations such as Intel and Teva Pharmaceuticals.
The order would change the tax rates on an estimated NIS 120b. in “trapped profits” accrued by the multinationals as part of the Encouragement of Capital Investments Law. The law currently exempts the corporations from certain taxes, as long as they invest their profits in further activities in Israel.
“Instead of conducting a proper income tax evaluation in accordance with the law and collecting debts to the good of state revenues,” Yacimovich said, “Prime Minister Binyamin Netanyahu appears as the Santa Claus of the rich, and introduces a special law to wipe those debts. This is so particularly irritating given the heavy tax burden imposed on the poor and the middle class along with the claim that ‘there is no such thing as a free lunch’.”
Also Sunday, the Knesset Finance Committee rejected a proposal by Committee Chairman Moshe Gafni to increase the corporate tax rate from 25% to 25.5%. Calling Israeli taxation policy “dreadful,” Gafni said that raising the tax by 0.5% would bring the country into line with other OECD member countries and increase state revenues by an extra NIS 400 million.
Treasury Director-General Doron Cohen pointed out that the Finance Committee approved raising the corporate tax on profits from 24% to 25% last year, and said most companies were already struggling enough without imposing an even heavier burden on them.
Cohen summarized the government package for the committee, rejecting accusations that they are Draconian and labeling the income tax hike “only a marginal increase.”
Those who earn NIS 15,000 per month will pay only NIS 20-30 more in direct taxation, those who earn over NIS 20,000 will pay around NIS 100 extra each month, and those who earn NIS 40,000 per month will pay around NIS 300 more, he said.