Israeli Government Announces Tax Benefit Package To Counter Rising Living Costs

JERUSALEM (VINnews) — In a Wednesday press conference, the Israeli government announced a 4.4 billion NIS package to counter the recent steep rise in the cost of living. The government measures will include lowering taxes for working families as well as decreases in prices of energy and food.

The move is a response to intense public opposition to the rising costs as prices of major utilities rose and a number of manufacturers and importers sought to raise prices but have delayed or cancelled the hike due to negative public opinion.

In a primetime press conference Wednesday evening, Prime Minister Naftali Bennett, Finance Minister Avigdor Liberman and Economy and Industry Minister Orna Barbivai shared their strategy. While not on stage, Foreign Minister Yair Lapid also was involved in its development.

Bennett touted the plan as “a new contract between the government and citizens, and a rational one,” focusing most of its effort on working families. “Citizens who work and bear the burden — they deserve to save more,” he said.

Liberman claimed that the plan was not a response to public pressure: “Even without the last wave of cost increases, without the wave of media [attention], we would have published the same steps,” he insisted.

The plan includes measures to reduce income taxes for some Israeli families, immediately: The government will give an additional income tax credit point to each parent per child aged 6-12 in 2022. Each point is worth NIS 233 ($73) that will be added to applicable families’ take-home pay each month. The measure is expected to amount to an additional NIS 5,352 per family per child for the year. However, the measure, once enacted by legislation, is expected to last only for 2022.

It will benefit an estimated 530,000 working parents at the cost of NIS 2.1 billion to state coffers.

Middle-class working families are expected to benefit from afternoon childcare subsidies, which will be extended to about 60,000 additional children in broader categories of socioeconomic standing, at an expected cost of NIS 150 million.

The government will also create a negative income tax, in the form of a grant, to the approximately 300,000 low-wage earners who bring home less than the threshold for income taxation. They will receive a one-time bump of 20% to their 2022 take-home pay. This measure, expected to cost NIS 250 million, will also require enacting legislation.

To address energy prices, the government will cancel excise taxes on coal for the rest of 2022 in order to reduce the expected price hike of electricity from 5.6% to 3.4%. Coal prices rose over recent months. The measure requires approval from the Electricity Authority and is expected to cost NIS 600 million.

Regarding food and consumer goods, the government will reduce tariffs on multiple imported products including food, toiletries and furniture.

Specifically, the plan is to remove customs duties on beef, fish, seafood, canned tuna, sausages, sauces, dried fruits, cakes and cookies, and flour. Tariffs on building and infrastructure materials, auto parts and household goods, among others, will be lifted. VAT is not addressed by the plan, nor is the direct cost of domestic goods. Finance Minister Liberman must issue an order to enable these measures, at the combined cost of NIS 1.26 billion.

In addition to the plan above, Liberman announced a new committee which will investigate how to increase competition in the grocery market..

Price increase announcements have been frequent in the last half year, with industrialists blaming rising conveyor costs for the price hike in imported foods. However only in the past week has the government felt the urgency to respond, following media and public pressure.

Some companies, such as Osem-Nestlé, partially capitulated to last week’s public uproar, canceling planned hikes in food prices for the next year. Other companies such as Diplomat, responsible for a large number of imported products, have also delayed planned price increases.