The Knesset on Monday passed a round of austerity measures – including tax increases – aimed at curbing the country’s budget deficit.
The measures, including a rise in value added tax on all purchases from 16% to 17%, will come into effect next month. In addition, income tax will rise between 1% and 3% for those in the middle tax brackets. The two lowest tax brackets and the highest bracket won’t see changes. Income-tax changes will take effect in January, according to the ministry of finance. Under the measures passed, employers will also increase their payments to social security, which funds Israel’s national health system.
“These responsible steps will protect the Israeli economy from the global economic crisis,” Prime Minister Benjamin Netanyahu said in a statement Monday night.
Last week, Israel’s cabinet approved the series of budgetary measures that included raising income tax and taxes on cigarettes and beer, and budgetary cuts for most ministries. The plan was touted as an economic safeguard against the country sliding into a recession. The austerity plan is also designed to close much of the deficit for the 2013 budget.
The new measures have already attracted public anger with thousands demonstrating against the government’s economic policies on Saturday in Tel Aviv.