In the coming era of anti-deficit budgeting, nothing will be taken for granted.
“We’ve said that all tax breaks are on the table, including tax breaks on savings plans,” a top Ministry of Finance official told Globes on Monday. “We’re considering an amendment,” he added, while declining to elaborate.
The amendment he referred to is a plan to reduce the tax break on pension savings through provident and pension funds and managers’ insurance.
Increasing tax revenues to close the gaping deficit is the immediate aim of the Ministry. But they’re also looking at a more equitable distribution of income. To that end, a measure to halve the cap for tax breaks from NIS 35,000 a month, is on the table, because the ministry believes that a salaried employee who earns more than NIS 30,000 a month should not be eligible for a tax break on the accumulation for pension savings. Another idea is to cancel the tax break on part of the accumulation.
“It is not certain that the state should help support a salaried employee who has already accumulated NIS 1.5-2 million,” said the senior Ministry of Finance official.
Whatever Ministry officials are thinking, though, the likelihood of such a measure getting past the politicians seems small. They would not care to face the outraged voters once they find out that their savings for retirement are being tampered with.
The government encourages people to save for retirement by granting tax breaks on pension savings that do not apply to other kinds of savings. But given the mandatory pensions required for all employees a few years ago, the government believes it can allow itself to cut the tax break from which only the working-age population benefits (with an emphasis on high income-earners), according to Globes.
The Ministry of Finance says, “For every shekel a worker saves, the state adds half a shekel through tax breaks.” But not for long, if they have their way.
According to the State Revenues Administration, the tax break on pension savings totals NIS 11 billion a year, making it the largest single item out of the NIS 40 billion in all tax breaks, and therefore an attractive target for budget cutters.