Israel Considers New Taxes to Boost State Revenue Amid War Costs
Translated & summarized from Al-Shams by baba
Israel's Ministry of Finance is considering new taxes to increase state revenue due to rising war-related expenses and public debt. Proposed changes could affect employee income, family tax benefits, the tech sector, and pensions. Discussions include a potential 30% tax on some stock options and a "Netflix tax" on foreign digital services. The final reforms will depend on government decisions and face potential opposition.
The story in 5 lines · by baba
- Israel's Finance Ministry is exploring new taxes to address rising state expenses and public debt.
- Proposed changes could impact employee net income, family tax benefits, and the tech sector.
- A 30% tax on certain employee stock options is under consideration, facing opposition.
- A "Netflix tax" on foreign digital services and a tax on vacant land are also being discussed.
- Reforms to pension and savings contributions are being reviewed to boost disposable income.
Israel's Ministry of Finance and Tax Authority are exploring a range of tax changes aimed at increasing state revenue, driven by rising government spending, war expenses, and increased interest payments on public debt. The proposals could impact employees' net income, tax benefits for families, the technology sector, and savings and pensions. These discussions follow a rise in the public debt-to-GDP ratio from approximately 60% before the war to 68.5% by the end of 2025, according to an economic report cited by Globes on October 22, 2026.
Among the proposals is a potential reduction in income tax rates on labor, offset by the cancellation of certain tax credits and existing benefits, including those tied to geographical areas and children. The annual cost of tax credits for children is estimated at about 14.4 billion shekels, suggesting any changes could significantly affect household incomes.
In the tech sector, a 30% tax on profits from certain employee stock options is being considered, specifically when options are not exercised immediately after vesting, as opposed to the current 25% reduced rate. This proposal faces opposition from the high-tech industry and some within the Finance Ministry, with Finance Minister Bezalel Smotrich also announcing his opposition.
Other ideas include reconsidering a tax on vacant land, a previous proposal that failed in the legislative process, which the Finance Ministry estimated could generate 9.5 billion shekels annually if fully implemented. Officials are also examining a value-added tax on digital services provided by foreign companies to Israeli consumers, sometimes referred to as a "Netflix tax," alongside potential taxes on luxury goods.
Regarding pensions and savings, discussions involve potentially reducing or eliminating mandatory pension contributions for those under 40 to boost disposable income. Conversely, some advocate for maintaining mandatory contributions and reducing associated tax benefits instead. The cost of tax benefits related to pensions is estimated at approximately 31 billion shekels per year, with further proposals concerning severance funds and other savings products also under review. The final form of any reforms remains contingent on government decisions and may face political and economic opposition.
