Israel Tax Authority Proposes Aggressive Tax Hikes for Next Government
Translated & summarized from Ice by baba
Israel's Tax Authority is proposing aggressive tax measures, including "VAT Online" and a property tax on undeveloped land, to boost state revenue by about 10 billion shekels annually. Director Shi Aharonovitch revealed the plans, which also address purchase tax on investment apartments and a new travel tax. He urged the formation of a stable government to pass the 2027-2028 budget, warning that delays would hinder economic reforms.
The story in 6 lines · by baba
- Israel's Tax Authority plans aggressive tax measures to raise 10 billion shekels annually.
- A "VAT Online" system aims to collect VAT immediately upon transaction.
- A new property tax on undeveloped land is proposed to encourage development.
- The purchase tax on investment apartments is set to drop significantly in February 2027.
- A travel tax is proposed, potentially generating 1.1 billion shekels yearly.
- Tax Authority Director warns against further elections, citing economic risks.
Israel's Tax Authority is advancing a package of aggressive tax measures for the next government, intended for inclusion in the biennial budget for 2027-2028. The plan, revealed by Tax Authority Director Shi Aharonovitch at a contractors' conference in Eilat, is projected to increase state tax revenues by approximately 10 billion shekels annually through closing tax loopholes and structural changes in collection methods. A key proposal is the introduction of "VAT Online," which would require immediate VAT payment (18%) to the Tax Authority upon transaction completion, rather than through delayed periodic reporting. This measure aims to eliminate fictitious invoices and is expected to generate an additional 7.5 billion shekels per year. In the real estate sector, the authority plans to impose an annual property tax of 1.5% to 2.5% on undeveloped land, intended to incentivize landowners to develop or sell their plots. The authority also warned that the reduced purchase tax on investment apartments, currently 8%-10%, is set to expire on February 28, 2027. Without legislative intervention, the tax will automatically drop to 5%, potentially reigniting demand from investors and driving up housing prices. Aharonovitch also noted that recommendations regarding taxation on rental properties would be finalized within two weeks. Additionally, the Tax Authority has proposed a travel tax starting in 2027, estimated to bring in 1.1 billion shekels annually, with levies of up to 274 shekels per passenger or 100,000 shekels per departing aircraft. Existing austerity measures approved for 2025, including frozen tax brackets and credit points, increased national insurance fees, and a VAT hike, will remain in effect through 2027. Aharonovitch emphasized the critical need for a stable coalition and the prompt approval of the 2027-2028 budget, citing challenges such as the potential cessation of U.S. aid. He stated that forming a government by December could allow for budget legislation by March 2027, enabling the implementation of economic reforms, but warned that proceeding without an approved budget would significantly complicate the rollout of tax reforms.
