"I do not foresee any tax cuts in 2027," Israel Tax Authority director Shay Aharonovich said today at the Emet Real Estate Conference hosted by the Tel Aviv and Central District Contractors and Builders Association in Eilat. He said state spending in the coming years would necessitate identifying additional revenue sources, beyond the growth in revenues expected from the expanding economy.
"We will need to find additional sources for about NIS 40 billion shekels for the coming year over and above the existing budget base and the revenues expected from economic growth," he said. He outlined three ways to address budgetary needs: increasing the deficit, cutting services, or boosting revenues. "That is where I come into the picture, to bring in more taxes in a smarter way. The years 2027-2028 will be very challenging."
Asked about US President Donald Trump’s remarks on American aid, Aharonovich noted that the fiscal challenge was broader in scope: "I don’t mean to downplay it, $4 billion is a significant sum, but one cannot ignore the fact that the defense budget has at least doubled from what it was before October 7." He added that "regardless of which government is in power, the defense budget is not going to shrink," and said that the heavy expenditures anticipated in the coming years will make it difficult to devise solutions.
Aharonovich noted that tax collection over the past two years had yielded better-than-expected results, and he commended the finance minister for backing measures aimed at narrowing the deficit and increasing state revenues, but he made clear that, even with these high tax receipts, he did not foresee any tax cuts in the coming year.
Taxing vacant land
On property taxation, Aharonovich supported the imposition of an annual tax on vacant land. He explained that he was seeking alternatives to raising VAT, companies tax, and marginal income tax rates. "Anyone holding such land should pay a form of wealth tax, a certain percentage each year," he stated, adding, "We need to look for options that don’t cause damage."
On taxation of rental income, Aharonovich emphasized the necessity of a mandatory reporting requirement, even if an attempt to levy taxes starting from the first shekel of income proved unsuccessful. "At the very least, even if we fail to impose tax from the first shekel, there must be a requirement to report." In his view, implementing a reporting obligation is a step that should be pursued, regardless of whether broader reforms to the taxation of rental income are adopted.
In addition to exploring new revenue sources, Aharonovich addressed the weakness in the housing market and the situation of the companies operating in it. "The situation for contractors is difficult; we are seeing a decline in tax receipts from the residential sector." Another source he pointed to was the intensification of enforcement against tax evasion: "We estimate that an additional NIS 7-8 billion can be brought in annually from the 'black economy'" he said. Aharonovich linked the fight against the black economy to the battle against protection rackets, emphasizing the need to stamp them out.
He also addressed the expansion of labor market participation as a factor that could facilitate future tax cuts. He said that the integration of haredi men into the workforce would contribute to economic growth: "I truly hope to lower taxes during my term. Perhaps it will happen toward the end."
Full disclosure: The author attended the 'Emet' Real Estate Conference in Eilat as a guest of the Contractors and Builders Association (Tel Aviv and Central District).
Published by Globes, Israel business news - en.globes.co.il - on November 5, 2026.
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