Israel Announces New Investment Taxes

by Robert Lee, Tax-News.com, London

13 June 2002

Israeli Finance Minister, Silvan Shalom on Wednesday endorsed a package of tax reforms designed to stimulate an economy depleted by the ongoing Middle Eastern conflict.

Among the proposals announced, which are based on recommendations from the Rabinowitz committee on tax reform, are plans to introduce a 1% tax on the value of stock market investments and a 15% capital gains tax on investment profits, both scheduled to be introduced next year.

However, analysts have suggested that the new revenue raising measures are likely to meet with fierce criticism, as they have done in the past, and have warned that although time is of the essence if the Finance Minister wants to pass the legislation ready for implementation next year, the passage of the new proposals is likely to be slow and painful.

The Rabinowitz committee also issued recommendations designed to reduce the tax burden on some sectors of Israeli society in order to compensate for the likely initial increase as a result of the investment tax measures.

According to a report from the Ha'aretz news service, direct taxes will be reduced on wealthy and middle class taxpayers, so that by 2008, the maximum amount of tax an individual will pay on his income will be 49%, as opposed to the current rate of 60%. Pensioners, and those on low incomes will benefit from a tax exemption of up to NIS 5,000 on certain investments, and the unemployed will be exempted on a portion of their savings.

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