Israel's cabinet has approved a NIS 607 billion budget for 2025 as well as budgetary adjustment measures totaling an additional NIS 37 billion.
Ministry of Finance plans that were dropped at the last minute from the budget proposal approved by the cabinet were: reducing tax benefits for advanced training funds, freezing the minimum wage, freezing the National Insurance benefits except for child benefits and canceling VAT for foreign tourists. On the other hand, in order to converge on the 4.3% fiscal deficit target, it was decided to increase National Insurance contributions for the general public.
The fiscal deficit at the end of 2025 will be 4.3% according to the budget that was approved - 0.3% or NIS 16.5 billion above the target that Minister of Finance Bezalel Smotrich had approved. One of the reasons for the higher deficit was the last minute decision to cancel freezing the minimum wage, without finding an alternative source of funding. A planned NIS 700 million cut in the Ministry of Transport budget was also dropped.
Smotrich said that the budget includes NIS 9 billion to help military reservists serving in the army over the past year. He added, "The main goal in the 2025 budget is maintaining the security of the state and achieving victory on all fronts, while maintaining the resilience of the Israeli economy.
"This budget will help and support the needs of the war so that it will lead to a victory that will allow the strong Israeli economy to grow and prosper for many years. This is a responsible and consolidated budget when the entire Israeli society bears the burden, led by the public sector and the government offices, so that the burden is shared among all without overburdening one sector or another."
Taxation measures that were approved as part of the budget, such as the freezing of income tax rates and credit points, will be moved to a fast legislative track, and will be separated from the approval of the full budget package in the Knesset. This, with the aim of approving them at the end of this year, while the 2025 budget is expected to be finally passed in the Knesset only in January or February.
The biggest obstacle to be overcome were differences between the Ministry of Finance and Ministry of Defense over the defense budget. This was resolved with an almost total victory for the Ministry of Defense, which received the extra NIS 20 billion it sought, above and beyond a NIS 25 billion increase in the 2025 budget.
Published by Globes, Israel business news - en.globes.co.il - on November 1, 2024.
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