As the approval of the state budget for the coming year approaches, several areas have been identified where significant price increases will impact all citizens of Israel. The price hikes have been put forth in order to balance the state budget, which given the current military campaign, bears an economic price tag in the form of a significantly increased defense budget. Along with other economic measures, the rise in prices will likely result in increased total expenses for Israeli families reaching thousands of shekels more per year.
Among the Expected Tax Increases:
- VAT: Value Added Tax, paid on every transaction, is expected to rise from 17% to 18%, raising prices in all sectors.
- Household taxes, including property tax (land tax) will incur a 5% increase and increases in water and electricity prices by 3.4% and 1%, respectively.
- National Insurance, which provides payment to reserve soldiers, will increase monthly fees to 80 shekel/citizen (for those who aren’t eligible for financial support). The increase is meant to minimize the economic drain on the National Insurance and prevent financial collapse.
- Public transportation prices are expected to increase by 2 NIS each way on most platforms.
- The Public Sector is planning to implement a wage reduction of up to 2.3% per month, but only for one year. This, according to an agreement between Finance Minister Bezalel Smotrich and Economy Minister, Nir Barkat.
In addition, a freeze on income tax brackets is expected. Income tax is a progressive tax, meaning that the tax rate increases according to the total income, which is divided into tiers called ‘brackets.’ This means that, despite an overall increase in wages due to inflation, the brackets will not be adjusted, resulting in many citizens paying a higher proportion of income tax. Furthermore, there will be a freeze on plans to increase child allowances, which will reduce the income of families with many children.
