Israel Tax Reform: Trajtenberg Proposals
Dr. Avi Nov, Adv.
October, 2011
The Trajtenberg Committee on Socioeconomic Change released its 267 page recommendations on September 26, 2011. The following is a summary of the main tax proposals by the Trajtenberg committee.
1. Tax reform
The lowering of income tax rates planed for years 2012 – 2016, according to the tax reform, will be cancelled.
2. Corporate Tax
Corporate tax will be raised from 24% to 25% and possibly 26% in 2013. It is assumed that such measure will only hurt small and mid-sized companies, since big companies may benefit from the tax exemptions contained in the Law for the Encouragement of Capital Investments. On these exemptions, see: Israel's 2011 Investment Incentives for industrial companies.
3. Raising income tax
A new top income bracket of 48% (instead of 45%) will be introduced for people earning more than NIS 40,000 a month.
4. Tax on the wealthy
An extra tax of 2% (surtax) will be introduced for people earning more than NIS 1 million annually. This means a 50% tax for those people. It appears that Netanyahu and Steinitz object this proposal.
5. Raising tax on investments
Tax on investments (such as dividend and capital gains) will rise from 25% to 30% for controlling shareholders (people who own more than 10% of a company's shares), and it will rise from 20% to 25% for everyone else. People earning more than NIS 1 million annually, may pay the above mentioned surtax (if accepted), and therefore pay 27% or 32% on their investments.
6. National Insurance ceiling
The ceiling for National Insurance and Health Tax payments will return to five times the average salary from the current nine times as established by the Economic Arrangement Law of 2009.
7. Fight against "wallet companies"
A committee will be established to fight against the practice of "wallet companies", i.e. employees who set themselves up as companies in order to save taxes.
See also: Trajtenberg Committee - Public Hearing
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This article is intended for informative purposes only and is in no way to be construed as tax advice or a legal opinion*
