In line with many other countries around the world, Israel’s Parliament, the Knesset, passed a this month aimed at narrowing the government deficit.
Following on the heels of a tax hike at the beginning of this year, increases in personal tax rates, to take effect from January 1, 2013 were generally modest involving 1% increases to certain tax brackets while effectively leaving lower to medium income earners unaffected.
The biggest change was the imposition of a super-tax of 2% on annual taxable income of over NIS 800,000 (around $200,000). This had originally been mooted last year and, coupled with a top marginal rate of 48%, pushes to the limit the prime minister’s repeatedly stated objection to taxing anyone above 50% of their income.
Employer’s national insurance contributions were also increased as was employer’s tax.
In another move, and most significant of all, the standard VAT rate is set to rise from 16% to 17% as from September 1.
Meanwhile, corporation tax has been left unchanged at 25%.