Book contents
- The Israeli Economy, 1995–2017
- The Israeli Economy, 1995–2017
- Copyright page
- Contents
- Figures
- Tables
- Contributors
- Preface
- 1 Lights and Shadows in the Market Economy
- Part I Government Policy and Macroeconomic Developments
- 2 Fiscal Policy: The Journey Toward a Low Debt to GDP Ratio and Smaller Government
- 3 Israel’s Taxation Policy
- 4 Inflation and Monetary Policy
- 5 From Deficits to Surpluses: Israel’s Current Account Reversal
- 6 Defense and the Economy, 1990–2016
- Part II Reforms and Their Effects
- Part III Investment in Human Capital, Productivity, and Inequality
- Part IV Key Issues in Various Sectors
- Index
- References
3 - Israel’s Taxation Policy
from Part I - Government Policy and Macroeconomic Developments
Published online by Cambridge University Press: 04 February 2021
Book contents
- The Israeli Economy, 1995–2017
- The Israeli Economy, 1995–2017
- Copyright page
- Contents
- Figures
- Tables
- Contributors
- Preface
- 1 Lights and Shadows in the Market Economy
- Part I Government Policy and Macroeconomic Developments
- 2 Fiscal Policy: The Journey Toward a Low Debt to GDP Ratio and Smaller Government
- 3 Israel’s Taxation Policy
- 4 Inflation and Monetary Policy
- 5 From Deficits to Surpluses: Israel’s Current Account Reversal
- 6 Defense and the Economy, 1990–2016
- Part II Reforms and Their Effects
- Part III Investment in Human Capital, Productivity, and Inequality
- Part IV Key Issues in Various Sectors
- Index
- References
Summary
After a long period of stability in tax rates, in 2004 a process of marked reductions in corporate and individual income tax rates began, leading to competitive levels in the global arena, thus attracting companies to Israel while making the departure of individuals and companies abroad less attractive. The chapter starts by presenting a review which shows that changes introduced in Israel’s tax rates were consistent with government’s multi-period budget constraint, except for a few periods. Between 1960 and 2002, tax rates changed in response to changes in government spending; whereas in the sub-period 2003–2015, the government deviated from this pattern: taxes dictated government spending rather than the reverse. The second section of the chapter examines whether there is a connection between politics and decisions regarding changes in the statutory tax rates. It is found that a government led by a member of a centrist party lowered both income and corporate tax rates, and that in a coalition controlled by a right-wing party prime minister, there was a tendency to reduce the corporate tax rate. It was found to be the case consistently, with evidence from other countries, that governments controlled by a left-wing prime minister increased the ratio of progressive to regressive taxes.
- Type
- Chapter
- Information
- The Israeli Economy, 1995–2017Light and Shadow in a Market Economy, pp. 73 - 102Publisher: Cambridge University PressPrint publication year: 2021
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