The Israeli cabinet approved a budget of NIS 607 billion for 2025 as well as fiscal adjustment measures totaling an additional NIS 37 billion.
The Finance Ministry’s plans that were abandoned at the last minute of the draft budget approved by the cabinet were: reducing tax benefits for advanced training funds, freezing the minimum wage, freezing national insurance benefits with the exception of family allowances and eliminate VAT for foreign tourists. On the other hand, in order to converge towards the objective of 4.3% budget deficit, it was decided to increase national insurance contributions for the general public.
The budget deficit at the end of 2025 will be 4.3% according to the approved budget – 0.3% or NIS 16.5 billion above the target approved by Finance Minister Bezalel Smotrich. One of the reasons for the increase in the deficit is the last minute decision to cancel the minimum wage freeze, without finding another source of financing. A planned NIS 700 million reduction in the Transportation Ministry’s budget was also scrapped.
Smotrich said the budget includes 9 billion shekels to help military reservists serving in the army over the past year. He added: “The main objective of the 2025 budget is to maintain state security and achieve 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 leads to a victory that will allow the strong Israeli economy to grow and prosper for many years. This is a responsible and consolidated budget whose society Israel as a whole bears the burden, led by the public sector and administrations, so that the burden is shared among all without overburdening one sector or another.
Tax measures that were approved as part of the budget, such as freezing income tax rates and credit points, will be transferred to a fast legislative track and will be separated from the approval of the full budget package at the Knesset. This, with the aim of approving them at the end of this year, while the 2025 budget should only be definitively adopted in the Knesset in January or February.
The biggest obstacle to overcome was the differences between the Ministry of Finance and the Ministry of Defense regarding the defense budget. This problem was resolved by an almost complete victory for the Ministry of Defense, which received the additional NIS 20 billion it demanded, in addition to an increase of NIS 25 billion in the 2025 budget.
Published by Globes, Israel Business News – fr.globes.co.il – November 1, 2024.
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