The Finance Ministry has threatened to raise VAT by 4.5% if the defense establishment's request for an additional 30 billion shekels in this year's budget is approved, according to a ministry warning published Thursday. The ultimatum escalates the ongoing budget dispute between the defense and finance ministries, as Israel grapples with high wartime spending commitments.
The Finance Ministry issued a stark warning on Thursday: if the defense establishment's request for a 30 billion shekel supplementary budget for the current year is approved, VAT will be raised by 4.5 percentage points — from the current rate to around 22%. The ultimatum was reported by the ministry itself and marks a sharp escalation in the long-running budget tug-of-war between defense and finance officials. The defense sector argues that the wartime operational needs and multi-year modernization plans, as previously reported by The Zioneer (PM Netanyahu ordered a 350 billion shekel increase over the next decade), require immediate funding. The Finance Ministry, by contrast, warns that such a cash injection would blow the deficit and saddle households with a massive tax hike. No specific timeline for a decision was given; the threat remains a negotiating position.
2 developments
- DevelopingIMF recommends raising Israeli VAT to 18%, cutting vacation days and freezing tax brackets
- StrongKnesset advances bill to cut VAT to 17% amid push to ease cost of living
- DevelopingEconomic commentator argues direct distribution would be more efficient than a VAT cut
- DevelopingButter import prices surge 73% since market liberalization, Agriculture Ministry finds
Source and signal
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