Judge Magen Altuvia of the Tel Aviv District Court revolutionized Israeli tax law, and gave working mothers a huge break, when he accepted the appeal of attorney Vered Pery and allowed her to deduct her child-care expenses from her income taxes. The ruling declared Pery's expenses for taking care of her children while she was at work to be business-related expenses - and therefore tax deductible.
Pery, a mother of two, claimed her child-care costs were not private expenses, as the Income Tax authority had ruled but were necessary expenses so she could work. Altuvia accepted Pery's reasoning, explaining if it was not for the need to work long hours outside of the home, Pery, a self-employed lawyer, would have chosen to spend as much time as possible with her children instead.
The judge also wrote that if the children were not placed in a structured, supervised framework during the parents' work hours, then parents would be unable to go to work and make a living.
Advertisement
The case related to Pery's payments to day-care centers from 1999-2001, where she sent her children until they were old enough for school. She also explained that she was ineligible to use subsidized day-care facilities as her income was too high. She also explained that if she stayed out of the workforce for too long in order to raise her children, then she would have lost her professional skills and ruined her professional career. Therefore, she was forced to find and pay for day care.
The tax authorities position was that child-care expenses are not deductible, and over the years the Knesset has chosen to provide working mothers with other tax breaks instead. For example, mothers receive child allowances and tax credits. In addition, the state claimed there was need for legislation to allow such deductions for child care.
In response, the judge said: "There is nothing in any of these [tax breaks] to show that without legislative intervention, there is no reason to recognize child-care expenses."
As to the the technical side, the ruling allows the deduction of two-thirds of the costs when the day-care centers do not provide meals, or when the meals were paid for separately; or half of the expenses when meals were included.
Judge Altuvia's decision said that Pery, like other workers, could not be free to practice her profession and earn a living without finding a way to take care of her children, which is part of parenthood.
The tax authority responded to the ruling saying: "The decision of Judge Altuvia does not meet the standard of offsetting expenses against income. In his ruling, the judge allows the deduction of child-care expenses that are personal in nature against business expenses - something which violates the rules set by the legislature as to expenses that are entirely used to generate income."
The Israel Tax Authority (ITA) said it would appeal the ruling to the Supreme Court. As of now, because an appeal is expected, the ITA will not implement the ruling yet.
In coming days tax assessors will receive instructions as to how to relate to income tax returns and requests to amend past returns concerning child-care expenses, said the ITA.
Attorney Moshe Shekel, Pery's lawyer, was very happy yesterday. "This is a precedent-setting ruling," said Shekel, "which presents a proper economic approach, modern, egalitarian, which represents a true contribution to collecting proper taxes. The court has made a decisive contribution to equal opportunity for the Israeli economy, and brought us closer to the enlightened nations of the world." Shekel said he was proud to be a part of the historic ruling.
Haaretz.com, the online edition of Haaretz Newspaper in Israel, offers real-time breaking news, opinions and analysis from Israel and the Middle East. Haaretz.com provides extensive and in-depth coverage of Israel, the Jewish World and the Middle East, including defense, diplomacy, the Arab-Israeli conflict, the peace process, Israeli politics, Jerusalem affairs, international relations, Iran, Iraq, Syria, Lebanon, the Palestinian Authority, the West Bank and the Gaza Strip, the Israeli business world and Jewish life in Israel and the Diaspora.
