Israel’s new tax plan will deepen economic inequality

The new economic plan of the Ministry of Finance, if approved, will include no fewer than 11 new taxes disguised as reforms.

Some of the taxes that the ministry wants to introduce are additional fees for soft drinks, single-use plastics, car entry into the center of the country, pension savings, electricity, among others.

All of these new taxes have one thing in common: they are all indirect. This means that the rich and the poor pay the same amount regardless of their income. As a result, these taxes will only deepen Israel’s economic inequality even further.

The Finance Ministry said these taxes are intended to “change the consumption patterns” of low-income populations, who consume a relatively large amount of sugary drinks and buy many single-use tools. Sure, ask them to install water coolers and eat with fancy china cutlery.

Taxes on soft drinks are in effect in only 10 countries in Europe and six cities in the United States. And according to a full report by the World Bank, the tax on sugary drinks reduces consumption, but with two conditions: there are no taxes on diet drinks and it does not increase the final price by more than 10%. Both terms were not included in the ministry plan.

The special tax for entering the center of the country by private vehicle, known as the “congestion tax”, was not used anywhere in the world before an efficient and affordable public transport system, such as the subway, was built in the area. , which will be available to Israelis sometime in 2045.

As a result, on the one hand, any small business owner in Tel Aviv, living in Hadera, for example, will have to pay dozens of shekel a day, a huge amount compared to total income. But on the other hand, the Ministry of Finance does not intend to undermine the sacred policy of “reimbursement of car expenses”, which is common in government offices and is a fundamental factor in traffic jams. So it turns out that it is easy to tax the weak.

Another problematic move, presented to the naive public only as a technical change, concerns those who have had savings in pension funds since 2004. The ministry offers to omit its main component – high-interest, state-issued bonds – rather than replace them. with a government guarantee to offset pension savings once every five years.

The proposed reform hides the tax and shifts the risk from the ministry to those with savings: future retirees.

Among other reforms is a law adopted from the EU regulations regarding consumer imports, which is supposed to make it easier to obtain business licenses. However, the new regulation is reportedly expected to make it more difficult.

Regarding the cancellation of the obligation to obtain approval from the Israel Standards Institute for the import of any product, as long as it has been approved by a similar institution in Europe, it will have little effect on consumer prices.

The 2021 Ministry of Finance acts as a single company controlling the economy, introducing failed and unnecessary reforms.

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