The Ministry of Finance in Israel is preparing the 2025 budget amid the complexities of the war on Gaza, the financial deficit, and the measures that taxpayers will have to bear, according to the Israeli Globes.
According to this economic newspaper, financial specialists say – in closed meetings – that political sensitivities will make the task of preparing the budget very difficult, noting that the question facing Minister Bezalel Smotrich’s team and the tax authority is how to fill a gap of about 70 billion shekels ($19 billion) in the budget. If the fiscal deficit target of 3% of GDP is still to be achieved.
According to Globes, the Israeli Tax Authority has several plans that were proposed in the past and rejected.
It quoted the Director of the Tax Authority, Shai Aharonovitch, as saying last Monday that he would try to expand the tax base (increasing the number of taxpayers by increasing the entities registered in the tax system).
Value added tax
The Finance and Tax Authority proposed moving forward the date of the increase (from 17% to 18%) – scheduled for the value-added tax rate – to be during June of this year instead of January 2025, which will bring billions of shekels to it that will start flowing from day one. .
According to Globes, the ministry is considering canceling or postponing the plan to continue benefiting from the purchase tax on the acquisition of an electric car as of January 2025.
According to Finance calculations, this will bring in 2.2 billion shekels ($599.12 million) in 2025-2026, and this means a jump in the purchase tax on electric cars from the current 35% to the full rate of 83%.
This measure would contradict the global trend to encourage the transition to environmentally friendly vehicles through tax exemptions, and therefore there are those in the government who oppose this idea.
Among the proposals that the ministry is studying – according to the newspaper – is to cancel the tax exemption on residential rents amounting to 5,650 shekels ($1,538.67) per month. The Finance Ministry has already done so several times, but it has always faced strong resistance from politicians.
According to Globes, the ministry could resort to canceling the value-added tax exemption on online purchases from external sites up to $75.
“Smotrich considered putting forward this plan, but the popularity of the exemption makes it difficult to move forward politically,” Globes quoted a finance source as saying.
Arnona tax
For its part, the Jerusalem Post newspaper reported that the cost of living in Israel may soon become higher after the Interior Ministry announced yesterday evening that the Arnona tax rate (municipal tax) will rise by 5.29% next year.
This represents the largest jump in the cost of Arnona in more than 17 years. In contrast, the arnona rate increased by 2.68% last year, while it increased by less than 2% in the previous three years.
The largest increase in this tax was recorded in 2009, when Arnona prices rose by 4.57%.
