Tax Authority Warns of 'Cruel' 2027-2028 Budgets Amid High Defense Spending
Translated & summarized from i24NEWS by baba
Israel's Tax Authority Director Shai Aharonovich warned that the 2027-2028 state budgets will be "cruel" due to high defense spending and ongoing conflict. He suggested measures like canceling the 200 shekel note and reducing cash use to raise 20-30 billion shekels. The Tax Authority is also considering tax increases, including VAT and capital gains, and reintroducing property tax to fund defense costs estimated at 200 billion shekels annually.
The story in 5 lines · by baba
- Tax Authority Director Shai Aharonovich warned of a "cruel" 2027-2028 state budget.
- High defense spending and ongoing conflict are cited as reasons for the projected budget difficulties.
- A proposal to cancel the 200 shekel banknote could generate 20-30 billion shekels in tax revenue.
- The defense budget is estimated to remain around 200 billion shekels annually through 2028.
- Potential tax increases include VAT, capital gains tax, and a possible reintroduction of property tax.
The Director of the Tax Authority, Shai Aharonovich, warned on Monday that the state budgets for 2027-2028 are expected to be particularly difficult due to high defense expenditures and ongoing fighting on multiple fronts. Speaking at a conference for tax consultants, Aharonovich stated that without additional revenue sources, the state may need to consider significant economic measures, including tax increases and reduced cash usage.
"I will tell you what the 2027-2028 budget will look like: a cruel budget," Aharonovich declared. He explained that no exceptional growth is anticipated to help fund state expenses, while the security situation continues to necessitate extensive investments. He estimated that the defense budget could reach approximately 200 billion shekels in both 2027 and 2028, partly due to reserve duty costs and arms purchases.
One proposal discussed was the cancellation of the 200 shekel banknote and a broader halt to cash usage in Israel. Aharonovich suggested that eliminating cash could generate an additional 20 to 30 billion shekels in tax collection, though he noted a disagreement on this matter with the Bank of Israel, which opposes the move.
Aharonovich also mentioned that the Tax Authority, the Chief Economist, and the Budget Division of the Ministry of Finance are already preparing plans for the 2027 budget to explore how defense costs can be financed through taxation measures that minimize public impact. Potential options include raising the tax rate on trapped profits from 6% to 8%, increasing VAT, and adjusting tax brackets and marginal tax rates. He also supported re-examining property tax, which was abolished in the early 2000s, calling its cancellation a mistake and suggesting it as another way to increase state revenue and avoid broader tax hikes.
