Nvidia's Crisis Could Impact Israel's State Coffers, Leader Warns
Translated & summarized from Ice by baba
Economists at Leader Capital Markets predict Nvidia will pay 10-15 billion shekels in Israeli taxes this year but warn its ongoing crisis could reduce future payments. State revenues are up 10% year-to-date, exceeding forecasts and improving the deficit, which is expected to be under 4% of GDP. However, future fiscal challenges include potential cuts in US aid and increased defense spending, with government stability seen as key.
The story in 5 lines · by baba
- Nvidia expected to pay 10-15 billion shekels in Israeli taxes this year.
- Nvidia's current crisis may reduce future tax payments to Israel.
- Israel's state tax revenues have increased by 10% this year.
- The budget deficit is projected to be below 4% of GDP for the year.
- Future fiscal risks include potential US aid cuts and defense spending increases.
Economists at Leader Capital Markets, led by Yonatan Katz, estimate that the American chip giant Nvidia will pay between 10 to 15 billion shekels in taxes in Israel this year. However, they caution that the extent to which Nvidia's current crisis will affect its operational pace in the coming years, and consequently its tax payments to Israel, remains unclear. This poses a significant risk, especially at a time when state tax revenues are exceeding expectations.
According to the review, state revenues have grown by 10% since the beginning of the year, partly due to high receipts from the business sector, including Nvidia. Excluding the effects of tax changes and inflation, tax revenues rose by a real rate of 8.4%. Leader economists project that if November and December tax revenues increase by a nominal 5% compared to the same period last year, total revenues for 2026 will reach approximately 579 billion shekels, about 12 billion shekels above the Finance Ministry's updated July forecast.
The robust revenue growth is also contributing to an improved budget deficit picture. The deficit for the 12 months ending in October stood at 3.3% of GDP, a slight increase from 3.2% the previous month, but still significantly below the updated annual target of 4.6% of GDP. Leader economists anticipate the actual deficit for the year will be less than 4%.
Alongside revenue increases, expenditure restraint is also supporting the fiscal outcome. Civilian expenditures have risen by only 1.4% year-to-date, compared to a budgeted increase of 6.1%. Defense spending grew by 9.9%, in line with the budget.
However, the current improvement does not guarantee a continued trend next year. Leader warns that the bond market is already looking ahead to the fiscal challenges of 2027. Key risks include the potential cancellation or reduction of security aid from the United States, additional budgetary demands from the Ministry of Defense, and a debt of approximately 20 billion shekels to defense industries. The economists stated that establishing a stable government would be crucial for maintaining fiscal policy credibility. Until then, operating under a continuing budget in early 2027 could somewhat curb spending. The warning regarding Nvidia adds another layer of uncertainty to this picture; while high tax revenues from the company are currently aiding the state, a slowdown in its operations due to the crisis could lead to Israel losing a significant income source in the coming years.
