Israel's Budget Deficit Halves as Tax Revenue Surges
Translated & summarized from Bizportal by baba
Israel's budget deficit has nearly halved in the first three quarters of the year, reaching approximately 29.5 billion shekels, a 48% decrease from the previous year. This improvement is driven by a 10.4% rise in total revenues, with tax income surging by 13.3%, outpacing a modest 3.4% increase in government spending. While corporate and capital market taxes are strong, property tax revenues have declined, and the government expects a significant spending increase in the final quarter.
The story in 6 lines · by baba
- Israel's budget deficit fell by nearly 48% to 29.5 billion shekels in the first three quarters of the year.
- Government revenues increased by 10.4%, fueled by a 13.3% rise in tax collection.
- Government spending grew by only 3.4%, significantly below the budgeted rate.
- Corporate taxes and capital gains tax revenues saw substantial increases.
- Property tax revenues experienced an 18% decline in September.
- The government anticipates a significant spending increase in the final quarter of the year.
Israel's public finances are in a significantly better position than projected, with the budget deficit for the first three quarters of the year falling by nearly 48% compared to the same period in 2023. The deficit stood at approximately 29.5 billion shekels by the end of September, down from 56.3 billion shekels a year prior. The overall deficit for the last 12 months remains stable at around 71.8 billion shekels, representing 3.2% of the GDP, well below the government's target of 4.9% for the year.
This improvement is largely attributed to strong revenue collection, which reached 77.9% of the annual target by September, outpacing the proportional spending rate of 69.7%. Total government expenditures grew by only 3.4% to 486.6 billion shekels, significantly less than the budgeted 7.4% annual increase. This slower spending is partly due to the government operating under a continuing budget in the first quarter, which limited monthly expenditures. Meanwhile, total revenues climbed by 10.4% to 457.1 billion shekels, with tax revenues alone increasing by 13.3%.
The surge in tax income is driven by higher collections from corporations, self-employed individuals, and the capital markets. Corporate tax revenue rose 12% in September, and overall tax income has grown 11.3% year-to-date. Notably, tax deductions from capital gains on securities have jumped by approximately 53% to 8.3 billion shekels since the start of the year, reflecting strong stock market performance. Tax revenue from the self-employed and shareholders also increased by 15%.
However, some sectors show weakness. Revenue from property taxes in September decreased by 18% year-on-year, with capital gains tax down 20% and purchase tax down 16%. While some of this decline is attributed to the High Holidays, property tax revenues are down 3% year-to-date, indicating a slowdown in the housing market. Deductions from salaries saw a 1% real decrease in September, and excise taxes on fuel fell 5% due to a tax reduction. The Ministry of Finance anticipates a significant increase in spending in the final quarter to meet the annual budget, projecting a need to spend approximately 70.5 billion shekels per month, an 18% increase over the previous year's monthly average.
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