Israel’s Finance Ministry prepares tax and spending-cut plan for defense — Jerusalem Post
Israel’s Ministry of Finance has prepared a package of economic measures for the next government, intended to finance an increase in the defense budget and curb the growth of the budget deficit and the public-debt-to-GDP ratio. Some of the initiatives were developed jointly with the Bank of Israel, the Jerusalem Post reports.
The proposed policy is to be implemented by the government formed after the elections. One of the main challenges for the new coalition will be adopting the 2027 budget or a two-year budget for 2027–2028, which must provide for comprehensive reforms under the Economic Arrangements Law.
Tax proposals
Possible measures include mandatory reporting of residential rental income and taxing such income from the first shekel. Currently, rental income of up to 5,654 shekels per month is exempt from tax. Some of these legislative initiatives have been delayed in the Knesset Finance Committee.
It is also proposed to introduce a tax on international content providers, known in the country as the “Netflix tax,” reduce tax benefits for pension contributions, and abolish VAT exemptions for sectors that currently receive such benefits.
More current news is available on the UA.News Telegram channel Telegram.
Under the current automatic budget provisions, the freeze on adjustments to income tax brackets, tax credit points and national insurance contributions, as well as the current VAT rate, will remain in place in 2027. Revenue from these measures is estimated at 10 billion shekels.
Fuel and the defense budget
After two months of subsidizing gasoline by 1 shekel per liter, which cost the budget more than 500 million shekels, the subsidy is planned to end on Saturday evening. This could raise fuel prices by at least 1 shekel per liter; further increases will depend on global fuel prices.
The price of a liter of self-service 95-octane gasoline, according to the publication’s expectations, may reach 8.90 shekels. At the same time, an approximately one-percent decline in the dollar’s exchange rate against the shekel could soften the increase. According to the Jerusalem Post, rising fuel prices may affect electricity, water and public transport rates, as well as the consumer price index.
Israel’s defense budget is expected to increase to 187 billion shekels. A substantial reduction in coalition funds is cited as one of the almost guaranteed sources of financing, along with large-scale efficiency measures in the budgets of government ministries.
