Dairy products may cost 5% more by end of January Photo: Shutterstock
2013 brings new wave of price hikes
Immediate increase in water, property tax rates to be joined in coming months by rise in prices of public transportation, electricity and basic commodities. Meanwhile, high earners' salaries expected to shrink
The first day of 2013 may be accompanied by a slight headache as a result of New Year's Eve celebrations,
citizens are experiencing a much more serious headache as a result of a series of price hikes taking effect Tuesday.
The even worse news is that this is just a preview for a series of price hikes and tax increases expected after the Knesset elections.
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Starting Tuesday morning, Israelis are paying 2.8% more for their water consumption, which is expected to become even more expensive later this year. The property tax, which usually rises in accordance with the consumer price index (which stands at 1.4% this year), will increase by 2.3%.
Electricity rates are not rising just yet, but are expected to increase by 10-15% in the coming months. Additional hikes are expected in the prices of public transportation, dairy products (which may rise by 5% by the end of January) and many other basic commodities.
And if that wasn't enough, Israelis' pay slips are expected to shrink as income tax goes up 1% for monthly salaries of more than NIS 14,200 (about $3,800). A double increase will be applied to monthly salaries of more than NIS 66,000 ($17,700) – reaching 50%, for the first time in many years.
In addition, income tax brackets will be adjusted to the increase in the consumer price index, resulting in further wage erosion. The good news is that Israelis earning less than NIS 14,000 ($3,750) will pay several shekels less every month.
For example, a woman who has three children over the age of five and earns NIS 12,000 will enjoy a reduction of NIS 29 ($7.8) a month, paying NIS 425 ($113.9) in income tax instead of NIS 454 ($121.7) today.
Employers will suffer another blow as the National Insurance contribution fees increase from 5.95% today to 6.5%. Both employers and employees' pension fund allocations will go up from 4.16% to 5%. While pension savings increase, the net income decreases.
Yet there are some people who are likely looking forward to their first 2013 pay slip – senior public sector officials, whose salary is linked to the consumer price index and the average income.
The salary of 650,000 public sector workers is expected to rise by 2.25% according to an agreement between the Finance Ministry and Histadrut Labor Federation.
Last but not least are Israel's 70,000 contractor workers, whose minimum wage will increase to NIS 4,600 ($1,233), as compared to the general minimum wage which will remain at NIS 4,300 ($1,152).