Israel's Tax Revenues Surge 28% in June as Deficit Drops to 3.3% of GDP

Israel's Ministry of Finance reported a significant fiscal improvement in June 2026, with tax revenues soaring by 28% compared to June 2025, signaling a rapid economic recovery despite ongoing conflict. The monthly deficit shrank dramatically to approximately 8.6 billion shekels, down from 16.8 billion shekels the previous year. Consequently, the cumulative deficit over the past 12 months fell to about 3.3% of GDP, a reduction of 0.4 percentage points.

Total government revenues in June reached around 45.7 billion shekels, and from the start of 2026, revenues totaled approximately 307 billion shekels, marking an 11.4% increase over the same period last year. Government expenditures were relatively restrained, with June spending at about 54.3 billion shekels and a modest 1.9% rise year-to-date to 313.8 billion shekels.

The surge in tax collection was partly due to a "base effect," as tax payments were deferred by an estimated 0.8 billion shekels in June 2025 amid the "War with the Lion" conflict. Even excluding this, real tax revenue growth was an impressive 15%. Year-to-date tax collections rose 10% to 297 billion shekels, slightly exceeding updated forecasts.

Direct taxes saw notable increases: self-employed gross collections jumped 53%, corporate taxes rose 28% to 11.9 billion shekels, and payroll withholding taxes climbed 28% to 16.4 billion shekels. Capital market taxes doubled to 1.6 billion shekels, while real estate tax revenues surged, especially a 90% increase in capital gains tax from non-residential property transactions. Indirect taxes also grew, with VAT revenues up 15% to 12.1 billion shekels and customs duties on imports spiking 59% to 3.1 billion shekels, driven by unusually high vehicle imports amid a low dollar exchange rate.

The Ministry's chief economist noted that since early 2024, Israel's economy has been on a strong upward trajectory with tax collections growing at an annual rate of about 10%, currently 16% above the long-term trend, reflecting a robust recovery despite the ongoing war.