The Israeli Cabinet approved a budget worth NIS 607 billion for 2025 in addition to budget adjustment measures worth a total of NIS 37 billion.
The Finance Ministry’s plans that were dropped at the last minute from the budget proposal approved by the Council of Ministers are: reducing tax benefits for advanced training funds, freezing the minimum wage, freezing national insurance benefits except for child benefits, and abolishing the value-added tax for foreign tourists. On the other hand, in order to reach the fiscal deficit target of 4.3%, it was decided to increase national insurance contributions for the general public.
The fiscal deficit at the end of 2025 will be 4.3% according to the approved budget – that is, 0.3%, or NIS 16.5 billion, above the target approved by Finance Minister Bezalel Smotrich. One of the reasons for the high deficit is the recent decision to unfreeze the minimum wage, without finding an alternative source of financing. The planned NIS 700 million cut in the Ministry of Transport budget was also dropped.
Smotrich said that the budget includes 9 billion shekels to help military reservists who served in the army during the past year. He added: “The primary goal in the 2025 budget is to preserve the state’s security and achieve victory on all fronts, while preserving the steadfastness of the Israeli economy.”
“This budget will assist and support the needs of the war so that it leads to a victory that allows the strong Israeli economy to grow and prosper for many years. This is a responsible and unified budget when the entire Israeli society bears the burden, led by the public sector and government offices, so that the burden is shared among all without burdening one sector or another.”
Tax measures approved as part of the budget, such as freezing income tax rates and credit points, will be moved to a fast-track legislative track, and will be separated from the approval of the full budget package in the Knesset. This is aimed at approving it at the end of this year, while the 2025 budget is expected to be finally approved in the Knesset only in January or February.
The biggest obstacle to overcome was the disagreements between the Ministry of Finance and the Ministry of Defense over the defense budget. This issue was resolved with an almost complete victory for the Defense Ministry, which received the additional NIS 20 billion it requested, in addition to a NIS 25 billion increase in the 2025 budget.
Published by Globes, Israel Business News – en.globes.co.il – on November 1, 2024.
© Copyright Globes Publisher Itonut (1983) Ltd., 2024.
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