Israel’s Finance Ministry is already preparing the 2027 budget framework and expects a wide-ranging package of reforms and tax measures when a new government takes office. Budget officials want to revive the plan to change how insurance brokers are paid, move ahead with a broader overhaul of financial regulation, and offset Israel’s rising defense costs with new taxes and spending cuts.
The article says the ministry’s Budget Department is working amid a tense relationship with the new budget director, Mahran Pronsper. It is aiming for a law that could resemble the landmark 2021 budget bill, which included major changes such as raising women’s retirement age, kosher reform, a congestion tax, the metro law, open banking, and taxation of retained profits. The next package, if adopted, could again be unusually large and heavily focused on finance and taxation.
One key target is insurance agents. A panel had recommended that customers, not insurance companies, pay brokers directly, to eliminate what it called a conflict of interest. It also proposed a single fee structure, fees quoted in shekels rather than percentages, and annual disclosure of service prices. Finance Minister Bezalel Smotrich said last year, “Insurance agents hold very significant political power,” and added, “I very much want to return to this issue.” The reform was shelved, but the ministry wants it back in the next budget bill.
Officials are also considering reorganizing financial supervision, which is now split among the Israel Securities Authority, the Capital Market Authority and the Bank of Israel. A 2022 attempt to move banking competition oversight away from the central bank collapsed after disagreements, and the issue is expected to return to the next government. Another committee is reviewing regulatory arbitrage to reduce gaps and increase competition among investment products.
On taxes, the ministry is weighing elimination of the exemption on study funds, broader reporting and higher taxation on rental income, a sharp reduction in income-tax credits, reviving a mileage tax while lowering car purchase taxes, and possibly new taxes on companies, inheritance, and foreign digital firms operating in Israel such as Airbnb and Netflix. Tax Authority chief Shai Aharonovich said the rental-tax measure alone could add 2 billion shekels a year, even before ending the exemption. The ministry warns that if defense spending keeps climbing, debt-to-GDP could reach 80% and the government will need unpopular revenue measures to preserve fiscal room.
