Israel Chief Seeks to Abolish 200 Shekel Note
Translated & summarized from NEWSru Israel by baba
The Bank of Israel opposes the idea, stating only its governor can abolish notes and no justification has been provided. Aharonovich also discussed upcoming budget challenges, ongoing conflicts, and proposed tax measures, including increasing profit distribution requirements for companies and reinstating property tax on undeveloped land.
The story in 5 lines · by baba
- Abolishing cash could generate an estimated 20 to 30 billion shekels in additional tax revenue.
- The Bank of Israel opposes the proposal, stating only its governor has the authority to abolish banknotes.
- Aharonovich warned of a tight 2027-2028 budget due to ongoing conflicts and high defense spending.
- Proposed tax measures include increasing profit distribution for companies and reinstating property tax on undeveloped land.
- The reform on undistributed profits, effective since January 2025, has already raised tens of billions for the state.
Speaking at an annual conference, Aharonovich argued that cash fuels the shadow economy and its removal could generate an estimated 20 to 30 billion shekels in additional tax revenue for the state. He cited the seizure of 200 shekel notes from a safe in Kfar Saba as an example of how cash is used illicitly.
The Bank of Israel, however, has expressed opposition to the proposal. In a statement released shortly after Aharonovich's remarks, the central bank asserted that only the Bank of Israel's governor has the legal authority to abolish banknotes. The bank noted that no professional justification has been presented for removing any banknote, and that no country has completely eliminated cash. Consequently, the governor has no intention of abolishing banknotes or altering the existing currency structure.
Aharonovich's statements come amid political promises to avoid tax increases in the upcoming budget. He warned that the 2027-2028 budget will be very tight, with no significant economic growth expected and ongoing conflicts necessitating a defense budget of approximately 200 billion shekels for both years. He also criticized rising expenditures on reservists and the purchase of Apache helicopters, a move opposed by the Finance Minister.
These proposals aim to raise tens of billions of shekels with minimal impact on economic growth and without increasing VAT or income tax. Measures under consideration include increasing the mandatory distribution rate for undistributed profits from the current 6% to 8% and potentially reinstating property tax on undeveloped land, which was abolished in the early 2000s. Aharonovich considers the earlier abolition a mistake.
The reform on undistributed profits, which took effect in January 2025, requires private companies to distribute a portion of accumulated profits or pay tax on them. Despite business opposition, this reform has already generated tens of billions of shekels for the state. Aharonovich rejected calls to cancel or soften the reform due to the current budget situation but promised to study its economic impact in 2027 and consider adjustments.
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