Israel Panel Proposes Raising Tax on Companies, High Earners

Israel should raise taxes on companies and on individuals who earn more than about $130,000 a year, according to a panel appointed by Prime Minister Benjamin Netanyahu in response to protests over the cost of living.

The committee, headed by economist Manuel Trajtenberg, proposed that corporate taxes be raised to 25 percent next year and 26 percent in 2013, from 24 percent this year. It said the top rate of income tax should be increased to 48 percent, and that the country must increase its stock of affordable housing and open its markets to more imports.

“The new Israelis of the summer of 2011 gave us a great opportunity to make a change and we need to take up this opportunity with both hands,” Trajtenberg said at a news conference in Jerusalem. “We absolutely believe that implementing these recommendations will bring about real change.”

Netanyahu tapped Trajtenberg to come up with the recommendations after a citizens protest movement set up tent camps in Tel Aviv in mid-July and organized street rallies across the country that attracted as many as 400,000 people.

The proposed tax increases would raise 30 billion shekels ($8 billion) over five years, and the money should mostly be spent on education, the panel said. It also proposed cuts to the defense budget.

Israeli consumer prices rose 0.5 percent in August, more than forecast, as rental costs climbed, government-regulated electricity fees increased and the weakening of the shekel helped push up import and travel prices. Annual inflation stayed at 3.4 percent, above the government’s target of 1 to 3 percent.

Netanyahu called the report an “important milestone” and said the recommendations if adopted would “allow the citizens of Israel to buy more with their money.”

To contact the reporters on this story: Jonathan Ferziger in Jerusalem at jferziger@bloomberg.net; Gwen Ackerman in Jerusalem at jferziger@bloomberg.net.

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net.

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