Plans are afoot in the Israeli Finance Ministry to cut the top rate of income tax to 49%. This is expected to bring an average salary increase of NIS 1500 ($316) per year to some Israeli earners.
The plan announced Tuesday by Finance Minister Benjamin Netanyahu and Minister without portfolio Meir Sheetrit also called for these changes to be implemented inside 30 months, instead of the originally intended five years. It is thought the total tax benefit of the plan will amount to some NIS 8.2 billion ($1.7 billion), and it is hoped this will be achieved in three stages, with NIS 2.5 billion ($500 million) being wiped off income tax payments in July 2003 and 2004, and a further NIS 3.2 billion ($673 million) in July 2005.
The plan will also seek to reinstate the salary ceiling on National Insurance Institute and health tax payments at NIS 35,000 ($7,300) per month. This will result in a NIS 6,500 ($1,360) monthly benefit to high wage earners.
In order to claw back some revenue after these tax giveaways, the proposals call for a scrapping of the geographical tax breaks for 80% of those eligible to claim. This is likely to raise about NIS 2.1 billion ($440 million). Only low ranking socio-economic communities will now be able to apply for this tax break.
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