Daily Israel Report

OECD: How Israel Compares on Taxes, Cell Phones

The OECD report includes comparisons of Israeli taxation, communications prices to the average.
By Maayana Miskin
First Publish: 7/1/2011, 1:38 PM / Last Update: 7/1/2011, 2:45 PM

Israelis pay only slightly more taxes than the average resident of an OECD nation, but are hit harder than most by indirect taxation, according to the recently released OECD report. Tax revenue is 31.4% of the GDP in Israel, compared to an average of 31.1%, as of 2009.

However, while Israelis pay little more in direct taxes than the OECD average indirect taxation is regarded as quite high. Income tax, National Insurance Institute (Bituach Leumi) payments, and health tax were included as forms of direct taxation, while indirect taxes included customs tax, VAT, taxes on gas and cigarettes, and more.

Direct taxation varies based on income, while indirect taxes are paid based by rich and poor alike based on consumption. A relatively high rate of indirect taxation could hit the poor and add to inequality, OECD experts warned.

Israel's highest 10% of earners have an average monthly income of 38,000 shekels a month – 42 times that of the average among the lowest 10%, which stands at just 917 a month. The monthly minimum wage is 4,100.

The highest earners pay approximately 65% of direct tax revenue, while the lowest earners pay 5%, primarily due to NII and health tax fees.

Cell Phones - 4th Most Expensive?
The report also found that Israelis pay more than most for the mobile phone plans. The average price for 300 minutes per month of phone time was about $103, the fourth highest in the world, following Portugal, Holland and the Czech Republic. Prices were adjusted for purchasing power.

However, the OECD package compared calls only. The average Israeli cell phone customer pays less than 150 shekels per month for their communications needs, according to the Communications Ministry.

The report was also based on data through August 2010, and did not take recent reforms into account.

Israel was also found to have lost some of its competitive edge, introducing fourth-generation phones more slowly than it had third-generation phones. Israeli communications companies have invested less than the OECD average in infrastructure in recent years, leading to slower Internet connection than the average.