Israel's tax revenues rose to a record NIS 29.5 billion in September. The tax collection surplus pushed the budget deficit for the past 12 months down to just 1.9% of GDP, the Ministry of Finance reports. Expenditure by the government's civilian ministries has risen by 8.6% since the start of the year, compared with a planned rise of 8.9% and defense expenditure rose by 6.4%.
NIS 4.2 billion of the taxes collected in September are described as exceptional by the Israel Tax Authority and their source is taxation on wallet companies. Under an administrative order that expired at the end of September, controlling shareholders of personal service corporations (wallet companies) were able to withdraw dividends from their companies at a reduced 25% tax rate, compared with the regular 33% rate (including 3% surtax).
According to the Israel Tax Authority's latest forecasts, NIS 10.5 billion will be collected this year from, the dividend tax on such personal service corporations compared with NIS 3 billion in an average year.
In addition, NIS 4.1 billion was collected last month as capital gains tax from Mobileye shareholders who sold stakes to Intel. Some NIS 15 billion in taxes will be collected this year above and beyond Ministry of Finance forecasts.
This amount will reduce the budget deficit unless a way can be found to transfer a sum to next year's budget. Government expenditure is limited by law so that it is not possible to increase expenditure by more than an excess of NIS 3.5 billion that was approved for the 2018 budget. To increase expenditure beyond that, the government would have to go through the full legislative process - a step that the Ministry of Finance would be reluctant to take due to the fragility of the government coalition.
Published by Globes [online], Israel business news - www.globes-online.com - on October 4, 2017
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