Tuesday, March 15, 2005

Tax Attack

All is not as it seems with the much vaunted tax reform according to an article in The Marker:
"Four of the five tax brackets affecting people making more than NIS 4,171 a month received a 2% to 6% tax cut. But those in the third tax bracket, earning NIS 7,421 to NIS 11,140 a month, actually pay 2% more."
Given that the average wage is hovering around NIS 7,000, it is clear that this group represents a large segment of the middle class; that their tax burden should have increased whilst those who are on far larger salaries have seen a tax decrease is both absurd and unfair. According to my understanding of the plan and that of the general public (because that is how it has been sold) the aim of the reform is to decrease income tax for everyone.

My first instinct was to give the Treasury the benefit of the doubt - perhaps one of their economists (enjoying a salary in excess of NIS 11,140) made a miscalculation with their slide rule and now has egg on their face and a notice of dismissal in their hand? Maybe Uriel Lynn, President of the Federation of Israel Chambers of Commerce, who is quoted in the article didn't do his sums correctly?

Reading on however, it appears that it was intentional, with Meir Kapota, the treasury's state revenues director (enjoying a salary considerably in excess of NIS 11,140), claiming:
"that the marginal tax rate for the third tax bracket was raised in order to partially offset the break given to those in lower tax brackets."
Now I'm no maths wizard but surely if the upper tax brackets had been reduced by a little less there would have been room for everyone to enjoy a reduction? I have no problem with tax breaks for the wealthy per se but clearly there is no reason why these breaks should be paid for by Yossi Average?

Perhaps of equal seriousness however is the fact that, assuming that in the absence of a denial from the treasury, this information is correct, then we, the public have been at best misled and at worst lied to. Towards the end of 2004 we were informed of the reductions which we would be enjoying from the start of 2005. It now appears that this was true for some but not for all.

This apparent discrepancy needs to be attended to as quickly as possible. Those who have already paid over the odds for their first two salaries of 2005 should be reimbursed and the treasury should publicly apologise either for their mistake or (if they really have the balls) for misleading the public.


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