Israel's Ministry of Finance is considering a plan to hike VAT to 18.5% from its current level of 17%, if required, a source familiar with the matter has told "Globes." The government has already approved raising VAT to 18% from January 1, 2025 as part of a special budget that was passed after the start of the war.
Today Minister of Finance Bezalel Smotrich presented his plans for the 2025 budget, which contained many painful measures including a freeze on public sector pay, tax brackets and allowances and pensions, higher income tax on the lowest tax bracket, and a series of savings and streamlining measures in government ministries and the civil service totaling NIS 35 billion. However, he did not mention the proposed VAT hike.
Smotrich has pledged to narrow the fiscal deficit to 4% of GDP. At the end of July 2024, the fiscal deficit was 8.1% of GDP, although Smotrich insists that the deficit will fall to the government forecast of 6.6% of GDP by the end of 2024.
Published by Globes, Israel business news - en.globes.co.il - on September 3, 2024.
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