Israeli gov’t mulls tax cuts as deficit narrows

The exceptional data published on Monday by the public accountant – a record number at all in the state’s revenues in January 2025 and narrowing the financial deficit faces the Ministry of Finance with a challenge. While the Ministry of Finance officials try to cool this enthusiasm, and to emphasize the factors for one time that contributed to standard revenues, in the background, the pressure is already increasing to alleviate the tax increases imposed on the public, and perhaps also the discounts in the budgets of the Ministry of Government

It is important to timing the data publishing, which included a budget surplus of 23.2 billion NIS in January alone. Although it is already in February, the state budget for the year 2025 has not yet been approved, and the discussions about it in Knesset are still advancing in a suit. Only this week, the first discussion of the Finance Committee, headed by MK Moshe Gafni, conducted a budget bill itself, before a long series of additional discussions before making decisions.

Some budget convergence measures have already been approved in advance, separately from the budget. While a set of amendments worth 26.2 billion New, which includes the Law of Persistent Persons (about 9 billion NIS) and the increase in national insurance contributions (NIS 4.6 billion), has already entered into force, and additional measures worth 10.1 billion NIS are still awaiting the approval of Knesateet, There is no certainty that it is approved.

Among the suspended measures is the decrease in the entertainment day for employees, which should result from 1.3 billion shekels for the state treasury, and a salary in the public sector is about 5 billion NIS. In the coalition, the Harid parties may exploit the exceptional revenue numbers as an argument to continue delaying the Ministry of Finance’s plans, against the background of the crisis regarding the draft law on employing the army and the conflict to finance educational institutions. They allow them to take control of the financing, employment and luxury committees in Knesateet to prevent budget initiatives, as happened in the 2024 budget.

“I would like to cut the value -added tax”

The National Council of Economic Council, Professor Avi Simhon, is already talking about a return to a more moderate policy. “We must study whether this is progress in revenue will lead to a decrease in the coming months, or a long -term trend,” says Simon Globe. “If we are convinced that this is an ongoing direction, we will need to renew the discussion about the reduction of taxes, and the first tax I would like to reduce is to reduce value -added tax to 17 %.”

The cumulative financial deficit has decreased over the past 12 months significantly, from 6.9 % of GDP at the end of December 2024 to 5.8 % at the end of January 2025, which is 115 billion NIS, according to the data published by the public accountant Yahley Rottenberg. The improvement in the deficit came after a record month in state revenues, which amounted to 63.1 billion in January – about 30 % higher than the previous record, exactly three years ago.

Revenue in January increased mainly due to advanced general payments before the various measures of the Ministry of Finance, such as the increase in value -added tax to 18 %, the new SURTAX, and the trapped profit law. At the same time, the aspect of government spending was also restricted because the Sunnis began without the approved state budget, which limits the spending of government ministries.

In January, the extensive state revenues were based on a 60.9 % jump in direct tax collection compared to January 2024, in the first months of the war. There was a major factor in the jump is the increase in profits payments that companies and wealthy have provided to the end of 2024, in order to avoid the new tax that entered into force at the beginning of 2025. According to the treasury estimates, this excessive element alone recorded a set of 7.5 billion shekels above the average Normal monthly.

On the indirect tax side, a large increase of 22.5 % was recorded, which led, among other things, from the audience that offers purchases forward in December 2024 before the value -added tax increased. At the same time, revenues from the purchase tax on vehicles actually decreased in January due to the offering of purchases to December, before updating the green tax on electric cars and increasing the price of cars.

On the side of spending, the government spent 39.9 billion Namo was in full swing.

It was published by Globes, Israel Business News – En.globes.co.il – on February 11, 2025.

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