Israel's Treasury Weighs Tax Overhaul, Considering Netflix Tax Over Inheritance Tax
Translated & summarized from Calcalist by baba
Israel's Ministry of Finance has formed a committee to overhaul the tax system, driven by fiscal needs and a desire for greater equity. While an inheritance tax is unlikely, the Treasury may widen tax brackets and introduce a "Netflix tax" on imported digital services. The committee is also considering taxing vacant land and luxury goods, aiming to boost revenue and incentivize economic growth.
The story in 5 lines · by baba
- An Israeli Treasury committee is reviewing the nation's tax system, considering reforms for the 2027 budget.
- An inheritance tax is unlikely, but a "Netflix tax" on imported digital services is being seriously considered.
- The Treasury may widen tax brackets to ease the burden on middle to high-income earners.
- The committee aims to address fiscal deficits and make the tax system more equitable.
- Taxing vacant land and luxury goods are also among the potential measures being discussed.
Israel's Ministry of Finance has established an internal committee to conduct a comprehensive review of the country's tax system. The committee, led by Tax Authority Director Shi Ahronovitch, Budget Division Head Mehran Froznifer, and Chief Economist Dr. Shmuel Abramson, is examining potential tax reforms. The initiative is driven by a confluence of factors: the upcoming elections present an opportunity for significant reforms by a new government, the current lack of a 2027 budget allows for in-depth analysis, and a fiscal necessity to address rising defense, interest, and reconstruction expenses. Officials aim to reduce the deficit and the debt-to-GDP ratio.
Beyond fiscal concerns, the committee also views the tax system as inequitable, burdening the middle class and inadequately incentivizing economic growth. This follows frustration with the tax package for the 2025 budget, which is seen as having been implemented imperfectly, including raising income tax and failing to eliminate unnecessary exemptions. The Treasury aims to present a more sophisticated and complete package of measures to a future government.
While no conclusions have been reached, potential directions are emerging. The idea of an inheritance or estate tax has been seriously considered but is now largely dismissed. Conversely, the Treasury is likely to widen tax brackets, easing the burden on middle to high-income earners, specifically by raising the threshold for the 31% tax bracket. There is also consideration for reducing tax benefits for children and taxing imported services, colloquially termed the "Netflix tax," which would apply to digital services consumed from abroad without VAT.
Further proposals include potentially reducing the tax exemption on severance fund gains before the seventh year. The Chief Economist's office has also explored taxing vacant land, a concept previously supported by Finance Minister Bezalel Smotrich for the 2026 budget but shelved. Additionally, taxing luxury goods is being considered, possibly through purchase taxes, as part of a broader strategy to increase revenue from non-employment sources, especially in light of potential job displacement due to artificial intelligence.
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