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Part Five - The Economic Plan

Changing the taxation system

Simplifying the tax structure

The complex tax laws in Israel are the result of a government policy that does not see taxation as a necessary evil needed to finance state expenditure, but rather as a tool to promote economic and social policies it considers desirable.

According to the present system, behaviors and populations which the authorities wish to promote receive tax relief, while undesirable behavior is punished with higher taxes and special levies. The exceptions are gainful employment and profitable initiatives – activities which are beneficial to the economy and it might be expected that the state would encourage them, where punished in practice with the greatest taxation. As a result of this system of taxation, Israel has a excessively complex tax structure which damages the economy, harms entrepreneurship and is too complicated for the average citizen to understand.

Large companies and wealthy people can afford first class accountants who are able to plan their tax payments to keep them as low as possible. Developers, the self-employed and owners of small and medium businesses that do not have these resources see their tax payments rise sharply just when they start to succeed. Many become discouraged and give up on their projects, many more give up on their initiative from the outset, and economic development is adversely affected, because talented people are not bringing their relative advantages to fruition. At the same time, cronies and pressure groups exert their political power to gain tax concessions and exemptions that serve their needs. It is hard to assess the damage to the economy and the decline in tax revenue as a result of this tax policy.

Zehut will reject the current tax policy and adopt the flat tax system – a flat tax (and as low as possible) which applies to all types of income. Without tax brackets, without credits and without concessions to cronies. A flat tax will encourage all citizens of Israel to initiate, advance and succeed as much as they can, and will eliminate one of the main tools of the government for top-down economic planning. The average citizen will be able to easily fill out his tax return, which will be a single page, whether salaried or independent. If tax relief for segments of the population or certain types of investments prove essential, it will be possible to convert them to a direct payment – so that we can see exactly how much funding costs us, and to weigh it each time anew.

Reducing the tax burden

Along with simplifying the tax structure, Zehut undertakes to reduce the tax burden on Israeli citizens. Reducing the tax burden will leave more money in the hands of the public, will contribute to the economic prosperity of the market, and it has the moral advantage of allowing each person to maintain as much as possible from the fruit of his labor.

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