Israel Considers Withdrawing 200 Shekel Notes Amid Budget Deficit Concerns

The Head of the Israel Tax Authority, Shai Aharonovich, has proposed withdrawing the 200 shekel banknote from circulation, citing the need for fiscal measures to address the state budget deficit and growing defense sector demands. Aharonovich suggested this could be part of a broader move towards a cashless society.

Speaking during a professional discussion with Yaron Gindi, President of the Association of Tax Consultants, Aharonovich explained that reducing the shadow economy is crucial for covering the budget deficit. He pointed to experience in the municipal sector, which he believes shows the necessity of limiting large banknote circulation, despite opposition from the monetary regulator.

The Tax Authority has reportedly faced revenue shortfalls due to substantial defense spending and compensation fund payouts, requiring billions of shekels even with high current collections. The proposed withdrawal of the 200 shekel note aims to combat the shadow economy and tax evasion, though analysts warn it could negatively impact honest citizens and small businesses.

The Bank of Israel quickly responded, reiterating its rejection of plans to alter the cash composition. The central bank stated that the sole authority to make such decisions rests with its governor and that no convincing professional justification for removing any currency has been presented. The Bank of Israel also noted that no developed country has completely abolished cash and affirmed that the 200 shekel note will remain legal tender, as its governor does not intend to use his authority to annul it.