Prime Minister Naftali Bennett, Finance Minister Avigdor Liberman and Economy Minister Orna Barbivai told reporters on Wednesday night in a briefing from the Prime Minister’s Office that the government will implement a new plan to reduce the rising cost of living in the country.
The NIS 4.4 billion ($1.3 billion) plan includes tax cuts for working families – the “heart of Israel,” Bennett said – as well as child-care subsidies and moves to stimulate business competition for essential products. “We will reduce the tax per working parent by NIS 223 per month for each child ages six to 12 – in other words, a two-parent family with three children at this age will have another NIS 1,300, net, every month,” he said.
“The second step is to reduce the prices for a variety of consumer goods such as meat and fish, flour, olive oil, eggs and furniture, kitchen items and other things.
“The government will also share the burden of rising electricity prices, so we will all feel it less,” he added.
The plan also includes measures to reduce the price of electricity and fuel, as well as dry goods and food staples.
The announcement comes just a week after media reports on the government’s intention to raise the price of electricity and gasoline. The increase in gasoline taxes was indeed implemented last week.
“Many families in Israel feel they have reached the red line,” Bennett said. “Inflation in Israel is moderate compared to what has been happening in the world at large in recent weeks, but because the cost of living here is high in the first place, it is the straw that has broken the back of the family.
“I want to make clear: we are not giving working families any money – we are simply taking less from them,” he added.
Nuts and Bolts of the Plan
Working families who pay taxes will benefit from an additional credit point for each spouse in 2022 and for each child ages 6 to 12, Bennett said, adding that some 530,000 tax-paying parents are expected to be affected by the change.
The benefit to a family with both spouses working will total up to NIS 5,352 per child per year, Liberman explained. For a family with two parents earning an average wage, and two children ages six to 12, the tax benefit will reach about NIS 10,500 per year – about NIS 875 per month. The cost of this part of the plan is estimated at about NIS 2.1 billion, he said.
The 300,000 employees who are entitled to negative income tax (work grant) will receive a one-time increase on their work grant of 20 percent in 2022, averaging about NIS 800 per year per employee. The benefit could reach as high as NIS 1,700 per year for mothers of three or more children.
Liberman said those who are eligible will receive advances on the estimated grant in July.
The cost of this part of the plan is estimated at NIS 250 million.
For the “Nitzanim” program of after-school care for children ages three to eight, the subsidy will be increased immediately by NIS 2,500 per school year per child for certain households, providing a savings to the affected families of about NIS 5,000 per year. Some 60,000 children are estimated to be eligible for the benefit, Liberman said, in addition to those who are already eligible for subsidies.
The cost of this component is estimated at NIS 150 million.
One of the most important elements of the plan, that which affects everyone in the country, is the reduction of the impending increase in the cost of energy.
Liberman said the government will reduce the upcoming electricity price hike from the planned 5.7 percent to 3.4 percent instead, in addition to a one-time reduction of the excise tax on coal this year – a move which will still require the approval of the Electricity Authority plenum.
The cost of this portion of the plan is estimated at NIS 600 million.
Liberman added that he plans to sign an order to reduce the price of food and essential goods by increasing exempt quotas and eliminating caps.
Included in the plan is the elimination of customs duties on beef, fish, canned tuna, sausages, dried fruit, cakes, cookies and flour. Exemptions are also expected to affect the price of olive oil, eggs and honey.
The cost of this part of the plan is estimated at NIS 260 million.
In addition, Liberman said the government plans to abolish tariffs on a variety of consumer and industrial products and raw materials for construction in 2022, totally some NIS 1 billion.
Among the products to be affected by this move are furniture, cutlery and other kitchen items, textiles, carpets, hygiene products, electric bicycles, raw materials and machinery for industry, raw materials for the construction sector, medical equipment and vehicle spare parts.
“I am not writing any checks without coverage,” Liberman said. “We are in good shape.”
