The great reform in the public’s savings was presented with great fanfare last week. The underlying principle, announced eighteen months ago, was to open an investment account for everybody, and thereby give more people access to saving. The argument is that people don’t invest because it’s hard for them to deal with the stage of opening an investment account.
That may be so, but it’s hard to escape the impression that, in the end, the real aim of the Ministry of Finance and the Israel Securities Authority, which are leading the move, is to impose more tax on the public.
A decade ago, investment provident funds were introduced. The state wanted to encourage long-term saving, and so it offered some tempting candy: an exemption from capital gains tax, but only for those who leave the money in the saving account until age 60, and then withdraw it as a monthly allowance. The benefit can amount to over a million shekels, if the saver saves for long enough and doesn’t withdraw the money for consumption purposes, and benefits from the compound interest effect, money that generates money.
But after a decade, the people at the Ministry of Finance took fright, or forgot the original purpose of the investment provident funds, in which the impressive sum of NIS 97 billion had accumulated. They decided that in the framework of the reform the benefit on all savings instruments would be on a maximum of NIS 200,000. In other words, the state is ceasing to encourage long-term saving and to put an end to the exemption from capital gains tax that savers accumulated.
The reason is clear: The cost of the benefit is estimated at NIS 2 billion. The Ministry of Finance claims that reducing the exemption won’t affect most people. Perhaps, but the aim was to make people save more for the long term. It’s hard to shake off the impression that the guys at the Ministry of Finance have no desire for people to benefit from a substantial saving of a million shekels in capital gains tax. The compound interest effect is apparently too powerful for the Ministry of Finance to allow the public to benefit from it to that extent.
Published by Globes, Israel business news - en.globes.co.il - on July 9, 2026.
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