Treasury: Reform will narrow social gaps

Advanced training fund tax exemption mainly benefits high earners.

The Ministry of Finance explains the decision to tax savings in advanced training funds as a measure that will narrow social gaps, and ensure a fairer and more balanced distribution of income in Israel. To justify the move, the Finance Ministry has published charts, which, it claims, prove the lack of justification for giving a tax exemption on advanced training fund savings.

The Finance Ministry claims that although funds like these are not meant to be a form of pension savings, they qualify for tax breaks that are excessive. Tax exemptions on advanced training funds amount to NIS 3.7 billion, NIS 2.2 billion of it in income tax.

The Finance Ministry has been claiming for years that only 37% of salaried employees benefit from the advanced training fund tax breaks, and that this proportion rises in line with the level of income. 86% of those who benefit from the tax breaks are actually among the top 30% of the population.

According to the Finance Ministry, only 4% of the bottom 10% of the population benefit from the tax breaks on advanced training funds. It also claims that the amount received in revenue from taxes on the funds will be redistributed among the public more fairly, through lower taxes.

Published by Globes [online], Israel business news - www.globes-online.com - on June 11, 2008

© Copyright of Globes Publisher Itonut (1983) Ltd. 2008

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