Finance Ministry Preps Harsh Budget Plan for Incoming Government
Israel's finance chief has drafted a package of tax hikes and subsidy cuts to cover an 187 billion shekel defense budget.
By Charles Morgan ·
The Israeli Finance Ministry has finalized a draft economic plan containing strict fiscal measures for the next government. The package is designed to fund a projected 2027 defense budget of 187 billion shekels while holding down the national debt.
Finance Minister Bezalel Smotrich ended a two-month gasoline subsidy that cost over half a billion shekels. The subsidy expired at midnight on Saturday, causing fuel prices to jump by at least one shekel per liter. The price of self-service 95-octane gasoline is expected to hit 8.90 shekels per liter, though a one percent drop in the dollar against the shekel may soften the rise.
The ministry projects these actions will generate 10 billion shekels in new revenue. Beyond the fuel tax, the plan includes mandatory reporting of residential rental income and taxation on rental earnings from the first shekel. This change eliminates the current monthly tax exemption for rents up to 5,654 shekels. The proposal also introduces a tax on international streaming services, commonly known as the Netflix tax, and reduces benefits on pension contributions.
Smotrich coordinated several of these measures with the Bank of Israel. The incoming coalition will be responsible for implementing the policy. They must pass a 2027 budget, or potentially a two-year budget covering 2027 and 2028, immediately after taking office. The budget must include comprehensive reforms under the Economic Arrangements Law. If approval slips past the end of 2027, the ministry will need to prepare a continuing budget.
Coalition funds will see sharp cuts to help finance the defense sector. The government will also implement efficiency measures across ministry budgets. Parties forming the new coalition must begin acting on these measures before the official government is formed. Existing automatic provisions will keep income tax brackets, tax credit points, and National Insurance contributions frozen in 2027.
The Tel Aviv Stock Exchange showed little reaction to Prime Minister Benjamin Netanyahu's weekend warnings about the crypto economy. Trading opened lower on Friday, the final day before the elections, following comments about possible sanctions and reduced US aid. The market quickly reversed course and moved into positive territory, with banking stocks remaining the exception. Traders appear cautiously optimistic about a change in government despite earlier monthly declines.
Source: The Jerusalem Post
