The government's emergency economic plan, which won final
Knesset approval in late May, went into effect July 1. The
plan hits very hard at the weakest sectors, and thousands of
families are expected to be pushed below the official poverty
Those receiving income support (havtachat hachnasah)
already received an allocation reduced by 25 percent at the
end of June, which is about NIS 600 for most recipients. Next
month child support payments (kitzvat yeladim) will be
reduced by a similar proportion. Many families will be hit by
Moreover, 5,000 families will no longer be eligible for
income support. The minimum wage is frozen. Unemployed youth
(below age 25) will only get 50 days of benefits instead of
Public sector salaries for July (paid at the beginning of
August) will be lower, with an aim to save NIS 4 billion. On
the other hand, a smaller chunk of July wages will go to the
state, as income tax reform also comes into effect.
The salary cutbacks will range from 0.29 percent for those
earning gross wages of NIS 4,000 per month to 8.31 percent
for those with monthly salaries of NIS 40,000 and above. This
is a salary cut of NIS 11.54 for the low-end earner and NIS
3,324 for those with salaries of NIS 40,000.
The wage cut will affect all public sector workers. The
president, prime minister, MKs, judges, ministry directors
and other senior public officials will also be reduced. The
prime minister's salary will drop NIS 2,564 to NIS 33,714
($7,750), and the monthly wages of MKs will be NIS 28,455
($6,540), some NIS 1,777 less than the current level.
The implementation of the income tax reform plan has been
expedited and will now be completed within two years instead
of four-and-a-half years as originally planned. In June 2005,
the highest marginal tax bracket will be 49 percent.
The tax reform implementation that will come into effect in
July will bring a monthly increase in net pay ranging from
NIS 14 for someone earning NIS 3,500 to NIS 82 for salaries
of NIS 30,000, according to the Finance Ministry.
Also starting in July, the ceiling on National Insurance
Institute (bituach leumi) and health tax payments will
be reinstated at about NIS 35,000 per month. This ceiling was
canceled about a year and a half ago and led many high
earners to seek tax shelters abroad to avoid making the
increased payments. However all salaried workers will pay an
additional two percent towards their pensions.
Monthly child allowances paid by the NII will be reduced in
July as the first step in a gradual program aimed at lowering
this budget allocation by NIS 2.5 billion. (The next
adjustment is not scheduled until 2004.) The allowance for a
family's first child will be only NIS 2 lower at NIS 144. A
family with two children will receive double this sum (NIS 4
less than the current amount). The more significant cuts
begin with three children (NIS 98 less). A family with ten
children below the age of 18 (of which there are not many)
will receive NIS 4,070 less.
In January 2009, at the end of the reductions, a family with
eight children is slated to have its child allowance cut from
the current level of NIS 4,063 to NIS 1,152.
Tax incentives for Israelis living in the Galilee, Negev,
West Bank and Gaza will all be canceled. The treasury hopes
this measure will bring in an additional NIS 1.5 billion in
tax revenues. The 25-percent tax break for residents of
Kiryat Shmona and Mitzpeh Ramon will remain in effect, as
will other communities which currently enjoy tax reductions
of 13 percent or higher.
New immigrants and returning residents will no longer get tax
breaks. Municipal arnona will go up 3.2 percent. Education
will be cut by NIS 500 million. Small clinics will be
Religions cultural organizations have not gotten any money
this calendar year and are owed money from last year. Those
who give shiurim will be taxed on the grants they get
for their work. Fifty kindergarten teachers in the Aguda
network were dismissed and hundreds more in the Chinuch
Atzmai network may be let go. Eligibility conditions for
various reductions will be tightened up. For example an
avreich whose wife works and who receives at least NIS
1000 from a kollel will no longer be eligible for
reductions in tuition and day care fees.
This list is not exhaustive.