Measures will cost average family NIS 7,800 a year

Ayalon Investment House calculates that the austerity budget will bite deeply.

The austerity measures in the 2013 budget proposed by the Ministry of Finance will cost the average Israeli family NIS 650 a month, or NIS 7,800 a year - almost equal to the average gross monthly salary, according to a preliminary analysis by Ayalon Investment House.

Minister of Finance Yair Lapid today sent the budget proposal for 2013-14 to the cabinet. It includes raising the marginal income tax rate by 1.5 percentage points, beginning in 2014, raising VAT from 17% to 18%, raising the companies tax rate from 25% to 26%, raising cigarette and alcohol taxes, and more taxes on housing.

Ayalon calculates the effect of the austerity measures on an average family with three children (who receive child allowance), in which both parents earn the average gross national monthly salary (which the Central Bureau of Statistics states was NIS 9,048 in February).

The calculation takes the following measures into account:

  • Reduction in the child allowance, which will total NIS 3,372 a year for a family with three children.
  • The 1.5% income tax hike will cost the average family NIS 3,260 a year.
  • The VAT hike will cost NIS 1,090 a year. Ayalon says, "A couple earning the average national salary consumes almost all of its income, which means that a VAT rate of 18% will apply to 80% of its income."
  • Miscellaneous: cancellation of the tax credit point for college graduates, cancellation of expanded dental care for children, increased participation in the cost of medication, and higher taxes on cigarettes and alcohol.

    The 1% companies tax hike on businesses, including small and mid-sized businesses.

  • Reduced government services, which means that the public will have to pay more for them.

"Bottom line, the average family will lose one of the parent's entire salary for a month. This is a serious blow to the middle class, which will have to calculate the figure in shekels in order to decide what it will have to forego in the foreseeable future," says Ayalon Group chief strategist Yaniv Pagot.

Published by Globes [online], Israel business news - www.globes-online.com - on May 7, 2013

© Copyright of Globes Publisher Itonut (1983) Ltd. 2013

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