Reforms to the Israeli income tax

Authors

DOI:

https://doi.org/10.18559/ref.2022.2.1

Keywords:

income tax, reforms, tax base, tax rate, Israel

Abstract

Income tax is a major component of state revenues, earmarked to finance the services provided by the government. Income taxes have a significant impact, among other things, on economic growth and income distribution. According to economic theory, personal income tax—perceived as progressive tax—is the main policy tool of the governments of developed countries and is aimed at reducing inequality in income distribution. The Israeli in- come tax has been through major reforms in the last decade and a half. These reforms include a reduction in income tax exemp- tions, steadily decreasing tax rates, simplification of tax calculation rules, reallocation of resources from the public and revenue sharing by reducing the income tax burden on the middle classes, a transfer from territorially based taxation of income earned or accrued in Israel to personally based taxation of income of Israeli residents, regardless of the place of earning the income. The result of changing the tax system and the transition to taxation on a personal basis means, in practice, an expansion of the tax base in Israel. This paper aims to describe the income tax prior to the reforms and the major reforms that had taken place up to 2017.

Downloads

Download data is not yet available.

Author Biography

  • Beny Tzarfati, Independent researcher, Israel

    Independent researcher

References

Barbetta, G. P., Pellegrino, S., & Turati, G. (2018). What Explains the Redistribution Achieved by the Italian Personal Income Tax? Evidence from Administrative Data. Public Finance Review, 46(1), 7–28. https://doi.org/10.1177/1091142116651488 DOI: https://doi.org/10.1177/1091142116651488
View in Google Scholar

Čok, M., Sambt, J., Košak, M., Verbič, M., & Majcen, B. (2012). Distribution of personal income tax changes in Slovenia. Post-Communist Economies, 24(4), 503–515. https://doi.org/10.1080/14631377.2012.729662 DOI: https://doi.org/10.1080/14631377.2012.729662
View in Google Scholar

Cordes, J., & Juffras, J. N. (2012). State personal income taxes. In R. D. Ebel & J. E. Petersen (Eds.), The Oxford handbook of state and local government finance. Oxford University Press. DOI: https://doi.org/10.1093/oxfordhb/9780199765362.013.0012
View in Google Scholar

Henchman, J. (2012). Income Tax Reform. Journal of State Taxation, 31(1), 33–34. Income Tax Ordinance [new version] 5721–1961. https://www.icnl.org/wp-content/up-loads/Israel_Ordinance.pdf
View in Google Scholar

Israel Tax Authority. (2021, March 21). Tax break package for new immigrants and returning residents. https://www.gov.il/en/departments/general/immigrant-guide
View in Google Scholar

Lee, Y., & Gordon, R. H. (2005). Tax structure and economic growth. Journal of Public Economics, 89, 1027–1043. https://doi.org/10.1016/j.jpubeco.2004.07.002 DOI: https://doi.org/10.1016/j.jpubeco.2004.07.002
View in Google Scholar

Ministry of Finance Committee of Experts on Income Tax Reform for Individuals Sheshinski Committee. (1988). https://www.gov.il/he/departments/PublicBodies/tax_reforma_experts_committee
View in Google Scholar

Ministry of Finance Report of the Committee on the Multi-Year Tax Plan, Mazza and Kaputa.(2005). https://knesset.gov.il/tql/knesset_new/knesset16/HTML_28_03_2012_12-56-32-PM/20050706@100690805@043.html
View in Google Scholar

Ministry of Finance Report of the Public Committee for Income Tax Reform, Ben Bassat Committee. (2000). https://www.gov.il/he/departments/units/tax_reforma_public_committee
View in Google Scholar

Ministry of Finance Tax Reform Committee, Rabinovich Committee. (2002). https://taxes.gov.il/about/reforms/documents/reform2002/taxreform2003p_02.pdf
View in Google Scholar

Ministry of Finance, State Revenue Division. (2001). https://www.gov.il/en/departments/ministry_of_finance/govil-landing-page
View in Google Scholar

Ministry of Finance, State Revenue Division. (2004). https://www.gov.il/BlobFolder/reports/state-revenues-report-2004/he/state-revenues-report_2004_Report2004_18.pdf Ministry of Finance, State Revenue Division. (2014). https://www.gov.il/en/departments/ministry_of_finance/govil-landing-page
View in Google Scholar

Ministry of Finance, Help table for calculation Income tax from salaryand wages. (2021). https://www.gov.il/BlobFolder/generalpage/income-tax-monthly-deductions-booklet/he/itc_itc_necuyim2021-1.pdf
View in Google Scholar

OECD (2010), Tax Policy Reform and Economic Growth. OECD Tax Policy Studies, No. 20. OECD Publishing. https://doi.org/10.1787/9789264091085-en DOI: https://doi.org/10.1787/9789264091085-en
View in Google Scholar

PwC Israel. (2022, July 1). Individual – Income determination. https://taxsummaries.pwc.com/israel/individual/income-determination
View in Google Scholar

Szarowská, I. (2013). Effects of taxation by economic functions on economic growth in the European Union. In E. Jircikova, A. Knapkova, E. Pastuszkova (Eds.). Proceedings of the 6th International Scientific Conference: Finance and the performance of Firms in Science, Education and Practice (pp. 746–758). Tomas Bata University in Zlin.
View in Google Scholar

Szarowská, I. (2014). Personal income taxation in a context of a tax structure. Procedia Economics and Finance, 12, 662–669. https://doi.org/10.1016/S2212-5671(14)00391-8 DOI: https://doi.org/10.1016/S2212-5671(14)00391-8
View in Google Scholar

Downloads

Published

2023-02-17

Issue

Section

Articles

How to Cite

Tzarfati, B. (2023). Reforms to the Israeli income tax. Research Papers in Economics and Finance, 6(2). https://doi.org/10.18559/ref.2022.2.1

Similar Articles

1-10 of 35

You may also start an advanced similarity search for this article.