Israel's War Compensation Fund Pays Out $10 Billion in Three Years

Israel's Tax Authority has released figures detailing the operations of the Compensation Fund, the largest economic arm deployed by the state during the current conflict, ahead of the third anniversary of the October 7th attacks. Over the past three years, the fund has processed approximately 1.2 million claims and disbursed around 38 billion shekels (approximately $10 billion USD). The fund operates under two distinct tracks: direct damage, covering physical destruction to property and vehicles, and indirect damage, compensating businesses for lost income due to the conflict.

The indirect damage track accounted for the vast majority of payouts, with nearly one million business claims receiving approximately 30 billion shekels. This means about 78% of the fund's disbursements went to compensate businesses for lost revenue, rather than for physical damage. Direct damage claims, numbering around 168,000, resulted in payouts of approximately 8.3 billion shekels.

Analysis of the data reveals significant differences in payouts across the various conflict periods. The "Swords of Iron" war against Hamas and Hezbollah, spanning roughly two years, generated 77,550 direct damage claims totaling about 3.3 billion shekels. In contrast, the "Shield of Iron" operation against Iran, lasting only 12 days, resulted in 54,140 claims but a higher payout of approximately 4 billion shekels. This disparity is attributed to the nature of the attacks; Iranian ballistic missiles caused widespread damage to entire buildings, unlike the more localized damage from rockets.

Buildings constituted the largest category of direct damage claims, with 114,000 claims amounting to about 6.4 billion shekels. Vehicles were the second largest category, with approximately 37,000 claims totaling around 612 million shekels. The fund also compensated for equipment, contents, and agricultural damage, with the latter primarily affecting communities in the Gaza envelope and the north.

The compensation for indirect damage was distributed through national, regional, and special "red" tracks. The "red" track, designated for businesses in border communities in the Gaza envelope and the northern confrontation line, received the highest average payout per claim, approximately 730,000 shekels, despite representing less than 1% of all indirect damage claims. These businesses often faced prolonged closures and evacuations, leading to substantial compensation for actual losses.

Despite the immense payouts, the fund is credited with helping the Israeli economy avoid a wave of bankruptcies. The relatively swift disbursement of funds, particularly through the regional tracks, enabled businesses to retain employees and continue operations. However, a backlog of around 40,000 indirect damage claims, mostly from the "Operation Iron Swords" period, remains under review.