Israel Considers Abolishing 200 Shekel Banknote Amid Tax Hike Concerns
Translated & summarized from Vesty by baba
He stated that eliminating cash could boost tax revenue by 20-30 billion shekels annually, despite opposition from the Bank of Israel. Aharonovich anticipates significant budget challenges in 2027-2028, necessitating tax increases, and proposed measures like raising VAT and income tax. The head of the Chamber of Tax Consultants, Yaron Gindi, agreed on the inevitability of tax hikes but called for less burdensome solutions.
The story in 3 lines · by baba
- Abolishing cash payments entirely could generate an additional 20-30 billion shekels in annual tax revenue.
- Proposed tax measures include raising VAT and income tax, and taxing rental income from the first shekel.
- Politicians present at a conference had previously promised to prevent tax hikes after the elections.
Speaking at a tax consultants' conference in Eilat, Aharonovich stated that removing the high-denomination note is part of a strategy to combat illicit capital and avoid significant tax increases in the coming months. He indicated that further restrictions on cash payments, which have already been limited, would be necessary.
Aharonovich mentioned that the Bank of Israel opposes the abolition of the 200 shekel note but highlighted recent police investigations into cash transactions, including within local authorities, as evidence of the need for stricter measures. He suggested that eliminating cash entirely could generate an additional 20 to 30 billion shekels annually in tax revenue, though the Bank of Israel is against such a move.
This statement contrasts with promises made by politicians at the conference, including Minister Eli Cohen, Naftali Bennett, Avigdor Lieberman, and Shaul Meridor, who pledged to prevent tax hikes after the upcoming elections if they join the government. Aharonovich, however, asserted that tax increases are unavoidable.
He revealed that a special task force, including himself and heads of various departments within the Ministry of Finance, is preparing proposals for tax increases for the next government. Aharonovich anticipates a "harsh" budget in 2027 and 2028, citing ongoing conflicts on multiple fronts and a potential increase in the defense budget to around 200 billion shekels, partly due to the U.S. president's stance on Iran. He also noted the significant costs associated with reservist call-ups.
Aharonovich proposed specific measures, such as a 1% VAT increase and a 1% income tax hike, along with narrowing income tax brackets instead of expanding them. He also criticized the earlier abolition of property tax on land as a mistake. Yaron Gindi, president of the Chamber of Tax Consultants, unexpectedly agreed that tax increases are likely but urged for measures that would be less burdensome on the general population. Gindi suggested taxing rental income from the first shekel, contrasting with the current exemption for income up to 5,654 shekels, and advocated for lower taxes on labor and full taxation of capital.
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