Israeli Government's Tax Collection Could Fall By NIS 4 Billion This Year

by Robert Lee, Tax-News.com, London

27 June 2001

Due to the recession and low inflation, Israel's state tax revenue is expected to fall by NIS 4 billion (New Israeli Shekel) to NIS 148.8 billion this year compared to the original forecast of NIS 152.8 billion.

According to the Israeli news service, Globes, the Ministry of Finance's original forecast for this year assumed 4.5 per cent GDP growth and 3.3 per cent inflation. However, the Ministry's most recent revision of its forecasts has led it to expect GDP growth of between 1 - 2 per cent, and inflation is set to be under 2 per cent.

Globes has also released statistics from the Ministry of Finance concerning a breakdown of Israel's taxpayers, according to which the income of 40 per cent of 'potential' taxpayers is well below the tax threshold, so they do not pay taxes as a consequence. In addition, 6.8 per cent of all taxpayers are in the highest tax bracket, this is up on last year's figure of 5.8 per cent which is largely down to the increase in the income of high-tech firms and their employees.

According to a survey by the Jerusalem Development Authority which monitors industrial operations in the city, high-tech firms represent about 43 per cent of industrial operations in the city. Jerusalem has been designated as a Level A national priority zone which allows high-tech firms to gain the status of an 'approved company' giving them significant tax benefits such as a tax break on profits for ten years.

Taxes paid by individuals in the highest tax bracket have now reached an average of 31 per cent of total government revenue and 54.3 per cent of overall income tax receipts.

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