The Ministry of Finance intends to stop allowing migrant workers to benefit from income tax credits, according to a leaked draft of the ministry’s new economic policy proposal. “Today, due to the economic situation in Israel, and due to the need to reduce the budget, and due to the government’s priorities, it is proposed to stop giving income tax credits to migrant workers,” the draft reads.
Income tax credits are reductions in the amount of income tax a person has to pay based on various circumstances such as residency, age, military status, family status, gender, etc. The amount of money a credit is worth is determined at the beginning of each tax year according to the change in the consumer price index from the previous year. An income tax credit in 2024 was 242 shekels ($64) per month, meaning that a worker with one income tax credit would have to pay 242 shekels less in taxes than someone with no credits.
Today, all migrant workers are entitled to at least one income tax credit. Palestinian and migrant workers in the home nursing industry are entitled to 2.25 income tax credits, similar to Israeli workers. Migrant and Palestinian women working in all industries are entitled to an additional half-credit, just like Israeli women. In contrast to Israeli workers, migrant and Palestinian workers are not entitled to credits based on marital status or children, nor are they entitled to additional credits such as that for living in the periphery. Asylum seekers and undocumented immigrants are not entitled to income tax credits whatsoever.
Income tax credits for migrant workers were originally added in order to support those coming to Israel and to incentivize their work in certain industries like home nursing, construction, and agriculture. Once these credits are repealed, the state is expected to receive an additional 410 million shekels ($109 million) in income taxes in 2025 and 610 million shekels ($161 million) in 2026.
This proposed reduction of benefits for migrant workers comes at a time that the state needs their labor more than ever. Since the start of the war, Israel has banned Palestinian workers from entering Israel, with the exception of a few thousands in essential industries. That decision caused a drastic increase in demand for migrant workers to replace these Palestinians.
The state and employers have struggled to find workers to fill necessary roles in the construction, agriculture, and industry sectors. Because of this, the government recently approved measures to allow migrant workers to be brought to Israel through private channels, instead of through the bilateral, international agreements that help protect migrant workers from exploitation.
The Finance Ministry claimed in its explanation for the proposal that the purpose of income tax credits is “to encourage behaviors that serve the state’s national goals.” According to the explanation, “credit points are awarded in order to progress objectives that reflect the government's policy on various issues—reducing the gender wage gap, supporting parents and their children, supporting living in the periphery, etc.”
The ministry further claimed that the credit points are given to residents of Israel so that they can finance their family’s living expenses and have enough disposable income to save. Thus, the minister maintains that the tax threshold should be a function of the cost of living where the worker and their family live.
Exceptions will be made in the home nursing sector
The ministry added that the tax credits are also “personal benefits” that the state gives to its residents based on the fact that they will live and work in the state for a significant portion of their life, if not the entirety of it. This is not true of migrant workers who are only in Israel for a limited time. “In this instance, the credits constitute a transfer of funds from the Israeli taxpayer to the migrant worker who will eventually transfer the funds outside the Israeli economy,” the ministry wrote.
The Finance Ministry did express its reservations about enacting the repeal on migrant workers in the home nursing sector, as they have been recognized as having unique characteristics that justify benefits different from those of other migrant workers. Among these characteristics is that they often stay in Israel for longer periods, often exceeding the 63-month limit placed on migrant workers in other industries.
“However, it should be noted that this exclusion is not applicable across the entire industry, rather is individual and must depend on the duration of treatment given to the original patient for whom the worker came to Israel, or on meeting established criteria by the Population and Immigration Authority for submitting an application to extend their license in the nursing industry for special humanitarian reasons,” the proposal read.
It noted that that exception did not “justify providing broad benefits for the entire group.”
In June, the Knesset approved, in a preliminary reading, a bill seeking to deprive migrant workers in the home nursing sector employed by private individuals of their right to a pension. The bill was written by several members of the Knesset from the governing coalition, including the chair of the Committee on Migrant Workers MK Eliyahu Revivo from the Likud party.
This article was translated from Hebrew and edited for context by Tzivia Gross.
