Israel's fiscal deficit continues to balloon out of control. The deficit totaled NIS 4.4 billion in August 2012, 37.5% more than the deficit of NIS 3.2 billion in August 2011. The the 12-month cumulative deficit is also accelerating, reaching NIS 36.8 billion for September 2011-August 2012, or 4.1% of GDP - more than double the Ministry of Finance's original 2% of GDP target, and well above the revised target of 3% of GDP.
The fiscal deficit nearly doubled to NIS 16.5 billion in January-August from NIS 8.4 billion in the corresponding period of last year.
Ministries spent NIS 149 billion in January-August, 10% more than in the corresponding months of last year. Budget performance was also high: 63.2% in January-August, 1.5 percentage points higher than the average for the preceding three years.
More worrying signs
The tax picture is no more encouraging. The tax shortfall reached NIS 3 billion in January-August, compared with the Ministry of Finance's revised projected revenues of NIS 221 billion, and the shortfall compared with the ministry's original projection was NIS 14 billion. The tax shortfall was reduced by one-time tax revenues of NIS 3.7 billion in January, as transactions were brought forward in advance of the capital gains tax hike (recommended by the Trajtenberg Committee).
Tax revenues totaled NIS 17 billion in August compared with NIS 16.6 billion in August last year. There was a sharp, 7.4% fall in real terms in direct tax revenues to NIS 7.9 billion in August from NIS 8.4 billion in the corresponding month, but a 9% increase in indirect taxes (VAT and customs), because of higher VAT and excise revenues. This rise was due to increased consumption in July ahead of the VAT hike, which was expected to come into effect on August 1, but which was postponed to September 1.
Analysis of the data shows a small drop, of 2-3%, in individual income tax revenues and capital gains tax revenues, and a bigger 19% drop in land tax revenues, which was entirely due to the plunge in betterment tax revenues. On the other hand, companies tax revenues rose strongly.
Published by Globes [online], Israel business news - www.globes-online.com - on September 5, 2012
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