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Proposal on gradual reduction of tax rates — Orbitax Tax News & Alerts

On 11 June 2008, the Finance Minister presented a proposal to the cabinet to gradually reduce corporate and personal income tax rates during the period from 2009 to 2015:

  • The corporate tax rate will be lowered from 27% to 20%.
  • The reduction of personal income tax rates will vary according to the income bracket. The tax rate in the lowest income bracket will remain 10%. The tax rates in the other brackets (currently ranging from 16% to 35%) will be lowered to a range from 11% to 30%. Further, it is expected that all residents will receive a 0.25-point tax credit, which will effectively raise the threshold for taxable income from NIS 4,253 to NIS 4,725 in the long term.

The proposal also includes a controversial tax on employer contributions to study funds (kranot hishtalmut). This tax should compensate for some of the state revenue lost as a result of the intended tax cuts. However, as with earlier attempts by the treasury to tax study funds, union leaders are voicing fierce opposition to the plan.