Israeli tax burden not too onerous after all, report shows

The OECD reveals that Israel’s taxes are lower than industrial world’s average, while confirming that its salaries are too

Doing taxes (Pixabay)
Doing taxes (Pixabay)

If the Organization for Economic Cooperation and Development is to be believed, taxes in Israel aren’t as bad as many think.

In fact, the tax burden in Israel is downright mild compared to most of the world’s. Israelis, according to the OECD’s final Tax Project numbers for 2014, which were released earlier in December, pay less in tax than residents of 22 of the OECD’s 34 member countries.

Israelis pay an average of 31.4% in total taxes, compared with the OECD average of 34.4%.

True, Americans pay an average of 24.5% of their income (as determined by each country’s tax to GDP ratio) in taxes, considerably less than Israelis do, but residents of Canada have a tax burden of 30.5%, not much less than Israel’s.

Those who wish to reduce their tax burden to the bare minimum while continuing to live in an advanced OECD economy are invited to move to Mexico, with a tax burden of 19.7%, or Chile, with an even 20%.

Israel compared well not only to highly taxed countries, like Denmark, Sweden, France, and others, but also to many countries without an extensive social benefits system. Countries with higher tax burdens than Israel include the UK (32.6%), Spain (33.2%), and Germany (36.1%).

Among the countries that beat Israel, in Australia, for example, taxes took 27.5% out of total income, while in Switzerland, the tax burden was 26.6%.

Israel’s value-added tax (VAT) as well is not all that bad, compared to those of other OECD member countries. At 17%, Israel’s VAT rate is the ninth lowest among OECD countries, with nearly all European countries imposing VATs of 20% or more (Hungary, with 27%, is the champ.).

Taxes on income and capital gains (32%) are close to the OECD average of 34%. Israelis, however, pay significantly less in social security taxes than the OECD average, with Israel ranking 27th out of 34 in the amount paid in 2015. Israel also features lower taxes on investment income and capital gains than OECD averages, the organization said.

Overall, the OECD said in its report, “the structure of tax receipts in Israel compared with the OECD average is characterized by higher revenues from taxes on payroll, property and value added taxes; a lower proportion of revenues from taxes on income, profits and capital gains and social security contributions; and matching the OECD average for taxes on goods and services.”

While Israelis’ tax burden is not onerous, however, they do have less money to pay taxes with. According to the OECD’s Better Life Index, “The average household net-adjusted disposable income per capita of $22,104 is lower than the OECD average of $25,908,” while “the average household net financial wealth per capita is estimated at $52,933, lower than the OECD average of $67,139.”

Despite that, the Index found, Israelis are generally happy with life – happier than many OECD countries.

“When asked to rate their general satisfaction with life on a scale from 0 to 10, Israelis gave it a 7.4 grade, higher than the OECD average of 6.6,” the report said.

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