Skip to main content

"The committee took the correct direction in basing its recommendations in three principal areas: capital tax, taxing Israelis overseas income and decreasing tax on labor. The committee's recommendations are exactly identical to those of the Ben-Bassat Commission and contain nothing new," said former income tax commissioner Yoni Kaplan, who held the office at the time of the Ben-Bassat report.

Kaplan said that the combination of the Rabinovitch reform and the emergency economic plan recently ratified by the Knesset is impossible. "The reform and the plan contradict each other. On the one hand the state is funding its deficit by raising the rate for value added tax and removing the ceiling on national insurance payments, and on the other hand is increasing its deficit by adopting a deficit-based reform".

Kaplan praised the decision to move to personal tax for all matters concerning Israeli citizens living and working abroad. Kaplan noted that "in the age of globalization and Internet, Israelis ability to move their source of income abroad greatly increased and the step is therefore important and should have been implemented four years ago".

Kaplan notes that the critical difference between the Ben-Bassat and Rabinovitch reforms lies in the multiple capital tax rates recommended by this year's committee as opposed to the single 25% effective tax rate proposed by Ben-Bassat. Kaplan estimates that the multiple tax rate system has several disadvantages including complicating the system, creating a tax planning loophole, making the tax an investment consideration, and creating payment for effective losses in periods of high inflation.

TheStreet Recommends