Specific Taxes in Israel
Beyond corporate and personal income taxes, Israel imposes a diverse range of specific taxes that contribute to its fiscal landscape. These taxes encompass various aspects of economic activity and individual wealth, serving specific purposes and policy objectives.
Value-Added Tax (VAT)
VAT is a consumption tax levied on the sale of goods and services. It is a comprehensive tax that applies to most business transactions, with a standard rate of 17%. Certain essential goods and services, such as food and healthcare, are subject to a reduced rate of 12%. VAT revenue is a significant source of government income, contributing to public services and infrastructure development.
Property Tax
Property tax is an annual levy imposed on the ownership of real estate. Rates vary depending on the property's value, location, and use. Residential properties are subject to a lower tax rate than commercial properties. Property tax revenue is primarily allocated to local governments for infrastructure maintenance and community services.
Purchase Tax
Purchase tax is a one-time levy imposed on the purchase of certain goods, including vehicles, luxury items, and real estate. The tax rate varies depending on the type of goods purchased. Purchase tax aims to discourage excessive consumption and generate revenue for the government.
Environmental Taxes
Israel has implemented various environmental taxes to promote sustainable practices and reduce environmental pollution. These taxes include levies on carbon emissions, waste disposal, and the use of non-renewable resources. Revenue from environmental taxes is often earmarked for environmental protection measures and conservation efforts.
Stamp Duty
Stamp duty is a tax levied on legal documents and transactions, such as property transfers, share transfers, and contracts. The tax rate varies depending on the type of document or transaction. Stamp duty revenue contributes to government revenue and may be allocated to various public services.
Capital Gains Tax
Capital gains tax is levied on profits realized from the sale of capital assets, such as stocks, bonds, and real estate. The tax rate is 25% for individuals and 30% for companies. Capital gains tax aims to ensure fairness in the tax system by taxing gains from asset appreciation.
Taxpayers Subject to Specific Taxes
The specific taxes in Israel apply to a wide range of taxpayers, including individuals, businesses, and organizations.
- VAT: Businesses engaged in the supply of goods and services are liable for VAT, with certain exemptions for specific transactions.
- Property Tax: Property owners, including individuals, companies, and trusts, are subject to property tax.
- Purchase Tax: Individuals and businesses purchasing certain goods are liable for purchase tax.
- Environmental Taxes: Companies and individuals engaged in activities with environmental impacts, such as manufacturing and waste disposal, are subject to environmental taxes.
- Stamp Duty: Parties involved in transactions subject to stamp duty, such as property buyers and shareholders, are liable for the tax.
- Capital Gains Tax: Individuals and companies realizing gains from the sale of capital assets are subject to capital gains tax.
Purpose and Rationale
The specific taxes in Israel serve diverse purposes and policy objectives:
- VAT: VAT generates revenue for government expenditure and public services. It also promotes economic growth and fiscal stability.
- Property Tax: Property tax contributes to local government budgets and infrastructure development. It also regulates property ownership and discourages speculative investment.
- Purchase Tax: Purchase tax aims to discourage excessive consumption and generate revenue for the government.
- Environmental Taxes: Environmental taxes internalize the costs of environmental damage and encourage sustainable practices.
- Stamp Duty: Stamp duty revenue contributes to government revenue and may be allocated to various public services and initiatives.
- Capital Gains Tax: Capital gains tax ensures fairness in the tax system by taxing gains from asset appreciation.
Legal Framework
The specific taxes in Israel are established and regulated by various legal statutes and regulations:
- VAT: Value Added Tax Law (1975)
- Property Tax: Property Tax Ordinance (1964)
- Purchase Tax: Purchase Tax Law (1991)
- Environmental Taxes: Environmental Protection Law (1992)
- Stamp Duty: Stamp Duty Law (1948)
- Capital Gains Tax: Income Tax Ordinance (1961)
These legal frameworks outline the obligations, rates, and procedures for the collection and enforcement of specific taxes in Israel.
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