Income tax for Israelis will not rise next year, as had been planned. Speaking to reporters Monday night, Finance Minister Yair Lapid said he was indefinitely postponing a “financial edict” he had announced several months ago that would have raised income taxes by 1%-2% on most Israeli wage earners.
Also to be postponed is an increase in taxes on self-employed individuals and businesses. Taxed for them had been set to increase 1.5%.
“We decided to cancel the increase in income tax that was set for January,” said Lapid. “We are cautiously taking this decision after taking into consideration a number of factors and conducting in-depth discussions with all involved parties,” he said.
Last April, Lapid announced that as a result of predicted budget deficits, the country had no choice but to raise taxes and cut the budget. The latter was to be slashed by NIS 18 billion, while the former would bring in an additional NIS 5 billion. As a result of the tax package, value added tax (VAT), Israel's version of a sales tax, was increased to 18%.
On Monday, Lapid said that the tax increase could be postponed because the budget deficit appeared to be lower than expected.
“We are cautiously considering all policies to try and lessen the burden on the middle class, which powers the Israeli economy but does not get anything back,” Lapid said. “They do not earn enough for their monthly expenses. We must do everything possible to ensure that their income grows.” Lapid added that at the moment he was not planning any other new taxes, “but I cannot promise that there won't be any,” he said.