Israel's tax revenues down NIS 4.5b in 2018

Moshe Kahlon  photo: Alex Kolomoisky, Yediot Ahronot

Much of the decrease was due to tax cuts by Minister of Finance Moshe Kahlon, the Accountant General reports.

State tax revenues in Israel fell NIS 4.5 billion in 2018, compared with 2017, while spending by government ministries rose NIS 18 billion, according to the state's financial statements published today by Accountant General Rony Hizkiyahu. The report uses figures to show the reasons for the deficit in 2018, which is expected to increase this year and next year.

Hizkiyahu's report states, "State tax revenues began a clear descent starting in May." Much of the decrease is attributable to tax refunds caused by the tax cuts by Minister of Finance Moshe Kahlon in 2015-2017. As of the end of 2018, the ratio of tax revenues to GDP reverted to its level in 2014. Spending set a new record of 28.5% of GDP in 2018 as a result of a sharp rise in spending by the civilian government ministries and a moderate increase in spending by the Ministry of Defense, accompanied by a slight fall in interest payments.

Another reason for the dip in revenues in 2018 was exceptional revenues in the preceding year. The picture in recent years, however, is clear: government spending grew at a rapid rate, while revenues failed to keep pace, resulting in a growing hole in the state budget. The 2018 budget deficit was NIS 38.7 billion, slightly more than the target set for the budget. The projected deficits for 2019 and 2020 are NIS 45-50 billion in each year.

Hizkiyahu writes in his introduction to the report that the reason for the increase in the deficit lies in tax revenues, not spending. "The low deficits in 2015-2017 led certain parties to mistakenly believe" that the reason for the relatively high deficit in 2018 was exceptional spending, while the actual reason was the very high revenues in the preceding years - one-time revenues that were not repeated in 2018, while spending remained more or less at the level of 100.4% of the budget, he explained.

The growth in government spending was not uniform. For example, spending on health has growth 81.7% since 2013, but quite a bit of this resulted from wage hikes for doctors and nurses. Spending on education increased by 35% in the past five years, and spending on wages for stage employees was up 23.5%, while spending on higher education increased by only 18.3% and spending by administrative ministries such as the Ministry of Foreign Affairs increased by 5.6%. The rise in spending by the Ministry of Defense was also fairly moderate at 20.6%, while spending by other ministries went up 35.8%.

Published by Globes, Israel business news - en.globes.co.il - on July 2, 2019

© Copyright of Globes Publisher Itonut (1983) Ltd. 2019

Moshe Kahlon  photo: Alex Kolomoisky, Yediot Ahronot
Moshe Kahlon photo: Alex Kolomoisky, Yediot Ahronot
Twitter Facebook Linkedin RSS Newsletters גלובס Israel Business Conference 2018