The move is part of an economic plan to reduce the cost of living presented by Prime Minister Naftali Bennett, Minister of Finance Avigdor Liberman and Minister of Economy Orna Barbivai.
By Erin Viner
“We are announcing the lowering of taxes for working families and the lowering of customs duties and prices on a range of products,” stated the Israeli Premier at a press conference alongside Ministers Liberman and Barbivai.
“Our government has put these parents, the working families, at the center regarding both take-home pay, which needs to rise, and expenses, which need to come down,” he said, while noting the country’s high cost of living relative to elsewhere in the world.
“Significant measures to ease the burden” to “bolster many households” include the lowering of income tax for every working parent by ₪ 223 (about $69 or €60) per month for every child aged between 6 and 12. “For example, a 2-parent family with 3 children in this age bracket that pays taxes will benefit from an additional ₪ 1,300 shekels (about $402 or €353) in take-home pay every month,” explained Bennett.
There will also be a reduction in “customs duties and prices on a range of consumer goods such as meat, fish, flour, eggs, furniture and kitchenware,” he said, in addition to eradicating the excise tax on coal and a “sharing in the burden” of rising electricity costs while working to lower the rate.
“Coal prices on an annual basis have jumped by 100%, and this has caused an increase in electricity prices,” explained Finance Minister Liberman, adding that, “The abolition of excise tax will eventually significantly lower the electricity rate.”
The government will also implement a 20% increase in the labor grant for low wage-earners and raise daycare subsidies.
“Dear citizens, these are not just tactical steps to slow the increase in prices. This is a new contract between the state and its citizens, a fair contract, one that says that the good working citizens who share the burden of the state’s existence deserve to keep more of their salaries,” stated Prime Minister Bennett.
“Our job, as the government, is to take less in taxes from you while very courageously creating true competition that will lower prices. We have seen to the elderly and the Holocaust survivors. Just a few days ago we raised the salaries of soldiers and young women doing national service and today we are seeing to the productive heart of the State of Israel – the working families.”
Bennett praised Finance Minister Liberman, whom he referred to as his “friend,” for his “excellent work” in “advancing a correct, and not populist, policy for the State of Israel and its citizens,” which was approved by Foreign Minister and Alternate Premier Yair Lapid and Economy Minister Barbivai.
Finance Minister Liberman vowed that another economic package will be unveiled in “less than a month,” and thanked the Israeli public for having “really behaved responsibly” amid the surging cost of living.
Meanwhile, Israel’s budget deficit declined to 3.3% of gross domestic product (GDP) over the prior 12 months in January, nearly reaching its pre-pandemic level and down from 4.5% in December, announced the Ministry of Finance yesterday.
Israel posted a budget surplus of ₪18.5 billion shekels (about $6 billion or €5.02 billion) in January, with tax income up 35% over the prior year.
Government expenses were 15.1% lower last month over January 2021, said the Ministry, adding that so far, ₪177.9 billion shekels (about $55 billion…€48.23 billion) – or 94% – of the ₪188.3 billion shekel (about $58.16 billion or €51.06 billion ) COVID-19 stimulus package launched in 2020 has been allocate.
12.1% of the total 2022 budget of ₪396.9 billion shekels ($122.59 billion or €107.59 billion) was spent in January.
The deficit in January 2020 was 3.2% of GDP, but it rose steeply amid state spending to counter the coronavirus, such as its world leading vaccination campaign, to as high as 12%.
Much of the narrowing of the deficit has come from sharply higher gains in tax income since the economy has rebounded well from the pandemic, as unemployment levels reverting back to nearly pre-virus levels.
Israel’s economy grew higher than expected to an estimated 6.5% in 2021, and is currently forecast to grow 5.5% this year.