Photo Credit: Flash90
The Israeli Tax Authority Building

Earlier this month, a group of Knesset members from parties across the political spectrum proposed or supported introducing an estate tax in Israel.

That proposal arises essentially out of the country-wide consciousness for “social justice” often equated with “take from the rich and give to the poor.” It is thought that taxing the wealthy will provide significant additional tax to the government coffers and make it possible to reduce taxation of those earning less and provide cheaper housing and cure all ills and social injustices.

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America has had an estate tax for close to 75 years and has over the last decade reduced the tax rate from a top rate of 45% to today’s top tax rate of 35% and reduced the estate tax base by increasing the exemption amount from $600,000 up to where it stands today at $5,000,000.

In today’s depressed economic state in the United States combined with a major election year, Congress is considering lowering that exemption level to $3.5 million. Israel is not about to be out done by America (and most western countries) and is considering introducing an estate tax of 5%-12.5% with an exemption for the first 15,000,000NIS (about $4million).

Israel had an estate tax some 30 years ago that was short lived. In fact, it was revoked before it could be implemented. There was such an uproar at the time that the estate tax law did not last a year.

Now, however, the socio-political atmosphere in Israel is such that taxing the rich is fashionable (encouraged by people like Warren Buffet) so much so that this time, there is a strong possibility that an estate tax will be passed and outlive its predecessor.

We will try, God willing, to keep you posted as developments in the area unravel.

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Shimon Galitzer is a US and Israeli CPA. He has his MBA degree from New York University with a major in Taxation and his JD degree from Columbia Law School in N.Y. In 1988 he established the Israeli CPA firm of Galitzer & Associates. His office can be reached at 02-652-5060.