The list of measures planned by Israel's Ministry of Finance as part of the 2025 budget is lengthening. In the latest draft of planned measures published by the Ministry of Finance, it has added a new imposition on employees who are supposed to receive a civil service unfunded pension (a pension from the state budget), an increase in social insurance premiums for the unemployed, restrictions on the absorption basket for new immigrants and moving forward with the invoice reform. There measures join the proposals to tax advanced study funds, cut pension benefits, freeze the update of income tax brackets and public sector pay and pensions.
Tightening terms for civil service unfunded pensions
The Ministry of Finance wants to tighten terms for recipients of civil service unfunded pensions for those who have not yet retired. Under the heading "Increasing equality in the terms of employment between the unfunded pension and the accrued pension," the Ministry of Finance seeks to increase the amount set aside for employees due unfunded pensions, from 2% to 7% starting January 1, 2025.
Today, employees on an unfunded pension (who began employment before 2002) enjoy better conditions compared with colleagues on an accrued pension. They pay less during their working years (2% compared with 7%), receive a higher pension benefit in retirement and enjoy absolute certainty regarding their income in old age.
The current proposal seeks to fully equalize the contribution rate of unfunded pension employees to those of accrued pension employees - from 2% to 7% - this is different from previous proposals that included a gradual rise. Previous proposals suggested raising the contribution rate to 4% on the wage component between the median wage and the average wage in the economy, and to 7% on the wage component above the average wage in the economy.
The amendment is planned to enter into force on January 1, 2025. The expected budget savings are about NIS 685 million in 2025, gradually falling to NIS 595 million in 2028.
Raising National Insurance payments for the unemployed
Another measure that the Ministry of Finance is now putting on the table is raising National Insurance and health insurance payments by 10% from NIS 203 to NIS 223 for the unemployed from the start of 2025. This will mainly affect the country's most disadvantaged populations and will net the state an extra NIS 660 million in 2025.
Restricting the absorption basket for new immigrants
The Ministry of Finance wants to give the absorption basket only to new immigrants who have assets worth less than NIS 500,000. The basket includes financial assistance, as well as assistance in housing, employment, college fees and welfare. Assistance includes reduced purchase tax on buying a home, and an exemption on capital gains tax on overseas assets for 10 years.
Published by Globes, Israel business news - en.globes.co.il - on October 14, 2024.
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