Treasury Prepares New 2027 Budget Package Targeting Insurance Brokers and Tax Breaks

Israel’s Finance Ministry is already drafting the next budget-arrangements bill for 2027, and officials expect it to be packed with reforms, tax changes and spending cuts. The plan is being shaped amid a sharp rift between the ministry’s professional staff and the new budget director, Maharan Pronzper, and against the backdrop of soaring defense spending and higher debt costs.

At the top of the ministry’s agenda is reviving the long-delayed overhaul of insurance brokers’ compensation. Under the proposal, clients would pay brokers directly instead of insurers, a change the ministry says would remove the conflict of interest identified by an internal report. The same package would also reorganize financial-sector supervision, possibly moving to a dual-head regulatory model, while the ministry continues work on reducing concentration in finance and on recommendations from an arbitration committee meant to align rules across investment products.

The ministry is also looking again at major tax changes. These include abolishing the tax exemption on provident and study fund deposits, introducing broad reporting requirements and higher taxation on rental income, cutting income tax credits, reviving a road-use tax for vehicles while lowering purchase tax, and considering new taxes on companies, inheritance, and foreign digital firms operating in Israel such as Airbnb and Netflix.

The background is a budget squeeze that officials say is driven by defense costs rising to about 8% of GDP from under 5% before the war, public debt climbing from 60% to 70% of GDP, and annual interest payments already reaching 20 billion shekels. Treasury officials warn that if defense demands are fully met, debt could rise to 80% of GDP, leaving the government with less fiscal room and forcing it to offset military spending with unpopular revenue measures.