People making up to NIS 20,000 a month are expected to keep a larger chunk of their salaries in the near future – between several hundred and NIS 2,000 a year – when a new Finance Ministry tax reform plan is implemented in January 2017. In contrast, those who earn monthly salaries of over NIS 60,000 a month are set to lose a hundreds, perhaps even thousands of shekels per year due to an increased tax burden under the new reform.
The reform was presented to the public on Tuesday by Finance Minister Moshe Kahlon. It centers around two major steps, set to cost the state of Israel around NIS 4 billion in 2017 and around NIS 4.8 billion in 2018. The first step is lowering the rates of income tax for those making less than NIS 20,000 a month.
The second step is reducing the corporate tax rate to a historic low. The current rate is 25 percent, and it is set to be reduced to 24 percent in January 2017, and then to 23 percent in January 2018. This step is intended to attract foreign businesses to Israel, and to prevent those who already have a presence in the country from choosing to leave.
The plan as presented on Tuesday shows significant effects for all seven existing tax brackets. Those who belong to the bottom three will pay less income tax and have a larger net gain of their salaries. In contrast, those who earn higher paychecks are set to pay more taxes than before.
The new reform will grant those who make up to NIS 6,000 a month an extra NIS 29 every month, which would accumulate to about NIS 350 a year. Those who make NIS 10,000 a month will gain NIS 65 from their reduced tax burden. Those making up to NIS 15,000 will gain an extra NIS 155 a month, and those making up to NIS 20,000 per month will make an extra NIS 89 under the new reform.