Knesset Plenum approves Law for Reducing the Deficit and Coping

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					                                  STATE OF ISRAEL
                                 MINISTRY OF FINANCE
                                  INTERNATIONAL AFFAIRS
                                       DEPARTMENT

August 6, 2012
                                        Press Release


Knesset Plenum approves Law for Reducing the Deficit and
Coping with the implications of the Global Economic Crisis

The Knesset plenum has approved the law for reducing the deficit and coping with
the implications of the global economic crisis. The law includes a package of steps
that will make it possible to reduce the deficit in 2012 and help meet the deficit target
of 3% for 2013, with the goal of maintaining the growth of the economy and low
unemployment rates.

The law bill includes the following steps:

Raising VAT from 16% to 17% as of September 2, 2012.

The 1% income tax increase for those earning more than NIS 8,881 and less than NIS
14,000 has been cancelled. In addition, the income tax brackets have been updated, as
follows:
Bracket 1 – up to 5,200 - 10% - unchanged
Bracket 2 – up to 8,880 -14% - unchanged
Bracket 3 – up to 14,000 -21% - unchanged
Bracket 4 – up to 20,000 – increasing from 30% to 31%
Bracket 5 – up to 41,830 – increasing from 33% to 34%
Bracket 6 – from 41,830 and above - 48% - unchanged

The income tax increase will commence on January 1, 2013.

A decision has been made not to update the Index for the three highest tax brackets.

The employer’s provisions to National Insurance (social security) will increase by
0.6% on the portion exceeding 60% of the average wage in the economy.
*The average wage in the economy, according to data from the Central Bureau of
Statistics for April 2012, is NIS 8,881.

                                              -1-
1 Kaplan St. Jerusalem 91030,           P.O. Box 3100,   Tel: 02-5317200,   Fax: 02-5695349
English: www.financeisrael.mof.gov.il                               Hebrew: www.mof.gov.il
A decision was made to charge 2% surtax on annual income exceeding NIS 800,000.
At the same time, a special team headed by Israel Tax Authority Director Doron
Arbeli will formulate recommendations for taxation of the family unit within three
weeks. The tax will apply as of January 1, 2013.

The collection of a tax on trapped profits of international companies that operate in
Israel has passed its first reading and will be discussed separately at a later date.

The extension of the ad hoc provision in the matter of purchase tax has passed its first
reading and will be discussed separately at a later date.




                                              -2-
1 Kaplan St. Jerusalem 91030,           P.O. Box 3100,   Tel: 02-5317200,   Fax: 02-5695349
English: www.financeisrael.mof.gov.il                               Hebrew: www.mof.gov.il

				
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