Summer 2011 saw widespread dissatisfaction with the government's social policy. Demonstrations throughout the country brought about the creation of a government-appointed commission in order to reset the state's social priorities.

The Trachtenberg Commission was quick to submit its report recommending numerous social reforms in housing, education, consumer protection and taxation. On October 31 2011 the government approved the commission's fiscal recommendations and sent them to Parliament for enactment into law. The amending bill was published on November 22 2011 and the effective date of the new legislation is scheduled for January 1 2012.

The recommendations include:

  • abandoning the course set for lowering the progressive tax rates for individuals;
  • amending the maximum progressive tax rate to 48% (instead of the envisaged 44% rate);
  • levying a surtax of 2% on high income (taxable income in excess of IS1 million a year);
  • according two credit points to fathers of children up to three years old;
  • reducing the maximum amount on which national insurance contributions are payable;
  • aborting the envisaged reduction of company tax to 18% over a number of years;
  • raising company tax from 24% to 25%;
  • increasing tax on real interest, dividends, capital gains and land appreciation from 20% to 25%. Unlinked interest will still be taxed at 15%. Substantial shareholders must now pay a 30% tax on dividends and capital gains (instead of the current 25% rate);
  • aborting the planned increase in gasoline excise tax; and
  • reducing the customs and purchases tax on imported consumer goods.

For further information on this topic please contact Amnon Rafael or Shlomi Lazar at A Rafael & Co Law Offices by telephone (+972 3 696 6999), fax (+972 3 696 1444) or email ([email protected] or [email protected]).