Employers’ parallel tax could be revived

The Health Ministry may initiate the return to increase budgets for health service by NIS 2b. a year.

Money 311 (photo credit: Bloomberg)
Money 311
(photo credit: Bloomberg)
The Health Ministry may initiate the return of the “parallel tax” on employers (mas makbil) – canceled in 1997 by then-prime minister Binyamin Netanyahu – to boost budgets for health services by some NIS 2 billion a year, the Health Ministry’s chief economics adviser, Dr. Tuvia Horev, told a conference on Wednesday.
Netanyahu, whose first term was between 1996 and 1999, approved the Finance Ministry initiative to cancel the parallel tax because he thought it would encourage employers to hire more workers, but it had little, if any, effect.
Instead of collecting taxes from employers, the Treasury was supposed to subsidize health fund services on its own, but since then, there has been a steady erosion of state support for these services.
The parallel tax gets its name from the fact that not only workers pay health taxes, but their employers also pay per employee.
Horev, a deputy director- general for economics and health insurance, said at the National Institute of Health Policy Research conference in Tel Aviv that in 2010, the basket of health services for the first time exceeded NIS 30b. and reached NIS 30.3b.
But health taxes paid to the National Insurance Institute by being deducted from paychecks and distributed among the health funds according to the number and age of members is a regressive tax, that weighs hard on the poor as well as the well-off, he said.
The deprived spent a greater percentage of their income on health taxes than the highest socioeconomic deciles of the population.

Out-of-pocket payments for medications and services have grown, while Treasury participation in health costs has declined, according to Horev. Thus today, 60 percent of health financing comes from non-progressive – and even regressive – sources.
Since 1997, Israel is one of the few Western countries in which employers do not have to contribute to the health costs of their workers.