Sources in the Ministry of Finance clarified yesterday in a conversation with "Israel Today" that expanding the tax benefits to additional groups will not even be considered as part of the additional package of measures to address the cost of living, which is expected to be presented in early March.
The remarks were also made by the finance minister in an interview on the "Weekend News" program with Dana Weiss.
Last week, Prime Minister Naftali Bennett, Finance Minister Avigdor Lieberman and Economy Minister Orna Barbibai presented the government's plan to lower the cost of living.
The most significant step in it, which is also the most expensive, is the addition of income tax credit points for parents of children aged 12-6 - which increases the disposable income of each parent by NIS 223 per month per child.
The move has drawn much criticism, in part due to the fact that parents of children aged 5-0 and ages 18-12 will not enjoy this benefit.
High tax threshold
What is behind the Treasury's opposition to extending tax benefits to additional groups of working parents?
Government officials explain that couples with children aged 5-0 already enjoy 2.5 credit points for each child, which brings them to a relatively high tax threshold.
For example, in a family with two children aged 2 and 4, the tax threshold for both spouses is higher than NIS 13,000.
That is, even if the benefit credit points are extended to this group, it will mainly help high-wage earners and there will be nothing for low-wage earners.
In contrast, expanding the benefit of credit points for the parent group for children aged 18-12, who as mentioned were not included in the financial plan, would have helped much more.
For couples with two children in this age group, there is currently one credit point per mother for each child, which brings them to a relatively low tax threshold of about NIS 6,400 per month for a man and about NIS 10,400 for a woman.
However, the Ministry of Finance is convinced that it is necessary to wait for the state's tax revenue data for February, and currently no income tax benefits are being considered for this group.
Not relevant to everyone
The benefit of providing income tax credit points is a tool that is relevant to only about 40% of the population.
The other taxpayers in Israel do not reach the tax threshold at all.
Therefore, the government should consider extending the assistance specifically to low-wage earners, for whom increasing credit points is irrelevant.
In general, due to different tax credit points, the tax threshold in Israel is considered high in an international comparison.
Thus, for example, according to data from the Tax Authority, in 2020 the share of direct taxes collected in Israel was about 30% of GDP, among the lowest places in the OECD.
For example, the same figure in Denmark and France that year was 46% and 45%, respectively.
Were we wrong?
Fixed!
If you found an error in the article, we'll be happy for you to share it with us
