Israel’s Budget Department is already preparing the 2027 Arrangements Law for a new government, and officials expect a large package packed with reforms. The ministry plans to revive a long-delayed overhaul of insurance agents, redraw financial regulation, and assemble a set of taxes and spending cuts to offset sharply higher defense costs. The effort comes amid peak tensions and a severe trust crisis between the department and the new budget commissioner, Mahran Froznpr.
The coming budget will face a far heavier defense burden than before the war, with military spending rising to about 8% of GDP from less than 5% and public debt increasing from 60% of GDP to 70%. If all defense demands are met, the Finance Ministry says debt could climb to 80%, leaving Israel with too little fiscal cushion for emergencies. Interest payments have already reached 20 billion shekels, roughly the size of the budgets of about eight small and medium ministries.
Among the flagship proposals is the insurance agents reform, under which customers, not insurance companies, would pay agents directly. The ministry wants to eliminate the agents’ conflict of interest, saying in a previous report that compensation from institutional bodies, which also manufacture the products sold, does not necessarily push agents to act objectively for consumers. The earlier plan also called for a uniform fee structure, fees in shekels rather than percentages, and annual disclosure of service prices, but it was shelved before the last Arrangements Law. Finance Minister Bezalel Smotrich has said he wants to return to the fight, saying insurance agents have “very great political power.”
Another target is the fragmented oversight of capital markets, which is now split among the Securities Authority, the Capital Markets Authority and the Bank of Israel. A similar attempt in 2022 collapsed after a committee led by then director general Ram Blanickov ran into disagreements, including over whether the central bank should keep responsibility for banking competition and whether it should also supervise pension funds. The issue is expected to land before the next government, alongside a broader anti-concentration push in finance and recommendations from a committee on regulatory arbitrage.
On taxes, the ministry is preparing to revisit a long list of politically difficult changes, including ending the tax exemption on study funds, taxing rental income more broadly, increasing vehicle taxes, reviving road-usage taxation, cutting income-tax credit points, and possibly introducing new taxes on companies and on firms operating in Israel without paying tax, such as Airbnb and Netflix. The ministry argues the next Arrangements Law will be closely tied to state revenues and will likely include measures meant to widen the tax base and make up for war-related spending.
