The narrowing of Israel’s fiscal deficit because of increasing state revenues continues. Over the 12 months until the end of August 2026, the fiscal deficit fell to 3.2% of GDP, or NIS 71.1 billion, down from 3.3% at the end of July, Ministry of Finance accountant general Michal Abadi-Boiangiu reports. The fiscal deficit in 2025 was 4.6% of GDP and the government’s deficit target for 2026 is 4.9% of GDP.
In August 2026, the fiscal deficit was about NIS 7.9 billion, compared with a deficit of about NIS 9.6 billion in August 2025. Since the beginning of 2026, the cumulative deficit has amounted to NIS 19.2 billion, compared with NIS 46.8 billion in the corresponding period of 2025.
The main reason for the improved fiscal deficit has been the relatively strong performance on the revenue side. State revenues totaled NIS 47.9 billion in August, up from NIS 43.9 billion in August 2025. Since the beginning of the year, revenues have totaled NIS 410.1 billion, compared with NIS 367.7 billion in the corresponding period last year - an increase of 11.5%.
Tax revenues have risen 13.9% since the beginning of the year. Tax collection in January-August amounted to NIS 397.6 billion, out of total revenues of NIS 410.1 billion. Revenues from direct taxes rose 16.3%, and revenues from indirect taxes rose 10.5%.
The increase in revenues is particularly significant given the fact that government spending only increased at a relatively moderate pace. Since the beginning of the year, expenditure has amounted to NIS 429.3 billion, compared with NIS 414.5 billion in the corresponding period last year - an increase of 3.6%, compared with a planned increase of 7.4%. However, the Ministry of Finance warns that the rate of growth in government spending continues to rise and will rise further in the coming months.
Government spending in August was NIS 55.7 billion. Since the beginning of the year, spending has totaled NIS 429.3 billion, compared with NIS 414.5 billion in the corresponding period last year - an increase of 3.6%.
Spending by civilian ministries has barely changed compared with last year, while defense spending jumped 10.9% to NIS 123 billion.
Total revenues increased by NIS 42.4 billion in the first eight months of 2026 while spending increased by only NIS 14.8 billion. However, the Ministry of Finance is already signaling that this is not necessarily a trend that will be maintained until the end of 2026, as the rate of growth in government spending is increasing, and estimates are that it will continue to increase in the coming months.
Cryptocurrency voluntary disclosure did not deliver
Amid relatively strong tax collection figures, the Israel Tax Authority's voluntary disclosure procedure closed at the end of August, which was intended, among other things, to uncover unreported capital and income subject to tax. But the procedure did not meet expectations, especially in the cryptocurrency sector.
As part of the procedure, 203 applications were submitted on profits from digital assets. These applications reported capital worth NIS 482.5 million, bringing estimated tax of NIS 51 million. The state had expected revenue of NIS 2-3 billion from the procedure, mainly from taxation of cryptocurrency profits, but the tax from the 823 disclosure applications submitted, in which total capital of NIS 1.89 billion was reported, was only NIS 152.6 million.
Published by Globes, Israel business news - en.globes.co.il - on September 8, 2026.
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