Israel Considers Abolishing NIS 200 Bill Amid Budget Shortfall Fears

Israel's Tax Authority Director, Shai Aharonovich, has raised the possibility of abolishing the NIS 200 banknote and even phasing out cash entirely, citing the projected "cruel" state budget for 2027-2028. Aharonovich suggested this measure could help address significant funding gaps, particularly due to increased defense spending and war-related expenses like the compensation fund. He acknowledged that the Bank of Israel opposes such a move, but believes it warrants reconsideration given the fiscal challenges.

The proposal, discussed during a conference with the Institute of Tax Consultants President Yaron Gindi, comes amid concerns about billions of shekels in additional revenue needed. Aharonovich stated, "We will need to cancel some of the cash," and specifically mentioned the NIS 200 bill, noting that the Bank of Israel's opposition has been overcome in similar situations, referencing the mayor of Kfar Saba.

The Bank of Israel has previously rejected similar proposals, asserting in April 2025 that no sufficient professional justification was presented for abolishing the NIS 200 note. The central bank emphasized that the authority to cancel banknotes rests with the Governor and that they have no intention of altering the current mix of circulating notes.

Eliminating cash entirely would represent a more radical step, requiring a fundamental overhaul of Israel's payment systems and raising questions about privacy and access to payment methods. The Tax Authority's push also aims to combat the black market and tax evasion, though it could impact citizens and businesses that legally use cash.