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Program for young from the Finance Minister. Expert commentary

The new economic program, presented on Tuesday, April 18, Minister of Finance Moshe Kahlana aimed at alleviating the financial burden on young working families with children.

The total program cost, which includes tax breaks for working parents, the increase of the negative income tax, the abolition of import duties on baby clothes and subsidize after-school care is estimated at 4 billion shekels a year.

According to the plan Kahlon, the program will be funded from the excess collection of taxes. In the Ministry of Finance stressed that not counting on the income from the transaction for the sale of the company Mobileye estimated at 4 billion shekels.

At the moment the excess tax collection amounted to 1.6 billion shekels. The growth of the economy, according to the forecast of the Ministry of Finance, should lead to an increase in revenues of 3 billion shekels in 2017 and 3.5 billion in 2018.

Review economic observer Michael Def

The new program is quite deliberate and aimed at specific population groups – working families with children, that is, to the electorate of the Minister of Finance Moshe Kahlon. The authors of the program managed to cover as families representing the middle class, and families from socially-weaker sections of the population, while not providing any of these groups, a double benefit.

Those who pay taxes, receive preferential tax units, those whose incomes are not taxed, will get addition to the negative income tax and subsidies for extended-day groups. In addition, all lower their prices on children’s clothing, shoes and mobile phones.

Another goal of the program is to divert attention from the situation on the real estate market. Reduction of prices on apartments, which was the main campaign promise Kahlon has not been achieved and in case of early elections the leader of the party «Kulanu» by and large have nothing to show their constituents.

In the Department Kahlon tried to avoid accusations of populism made immediately after the transaction Mobileye, when the Minister of Finance and Prime Minister Benjamin Netanyahu promised to lower taxes.

Political observers say that the program Kahlon prepared in secret and not consistent with the Prime Minister. Regardless of the reasons why the Minister of Finance to take this step (among them, in particular, called the conflict over radio and television), the fate of the program will largely depend on whether Kahlon to negotiate with Netanyahu.

The only item on the agenda, Kahlon does not require coordination with coalition partners, is the abolition of fees. This step, which is estimated at 800 million shekels a year, is the responsibility of the Minister of Finance and may be made by signing of the corresponding decree (further approval required of finconesia of the Knesset, but in this case, to achieve it would be easy enough).

All other sections require coordination in the government and in the Knesset. And it is already clear that to achieve the consent of the partners (in the first place – the «Likud») Kahlon will not be easy.

The office of Netanyahu has called the program «a step in the right direction,» but in the Likud had demanded as a condition for programme support Kahlon funding for benefits for persons with disabilities.

The points of the program

Preferential tax units

The cost of preferential tax unit 215 shekels a month. The program provides fathers an additional 0.5 units in the first three years of a child’s life, and 1.5 units for the fourth year and 2.5 units of 5-6 years of a child’s life. Mothers will receive an additional 1 preferential unit in the first year of life and 0.5 units from the second to the sixth year of a child’s life.

The cost of this item of the program is estimated at 1.7 billion shekels. Unlike many other programs, which grant credits only to mothers (revenues most of which do not reach the level of taxation), this time the Finance Ministry has decided to provide relief for the fathers. This explains the high cost of the program, and the expected substantial boost to income for young families net (from a few thousand to twenty thousand shekels a year). The introduction of this section retroactively from 1 January 2017.

Subsidised after-school care

The Ministry will subsidize day-care centers in accordance with the socio-economic cluster refers to a particular locality. Currently, the state subsidizes day-care centers in the weakest clusters 1-3. The program provides a subsidy of 350 shekels a month per child from 3 to 8 years in cluster 4 (Kiryat gat, Yeruham, Kiryat Malachi, Lod, Ramle, etc.) and 300 shekels in the cluster 5 (Ashdod, Ashkelon, Afula, Kiryat Yam, Beersheba, etc.). In clusters of 6-10 subsidized extended day will only be for students in grades 1-2 (300 shekels a month in cluster 6, 200 in the cluster 7, 150 – clusters 8-10).

The cost of subsidies 900 million shekels a year, starting with the next academic year. In the preparation of this item implied that the majority of inhabitants of settlements in clusters of 6-10 will receive subsidies in the form of preferential tax units.

The increase of the negative income tax («Manac labor»)

The program provides for the adjustment of the rights of men and women to receive negative income tax (until now, men received 165 shekels a month less). In addition, it provides an additional bonus of 30% for families in which both parents work. The program costs 750 million shekels a year starting next year.

Cancellation fees

The Ministry plans to cancel import duties on mobile phones (15%), footwear (12%) and garments for babies (6%). The point value of 800 million shekels per year.

Program for young from the Finance Minister. Expert commentary 19.04.2017

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