- Israel’s Finance Ministry is considering raising VAT from 18% to 19% to fund a major increase in defense spending and address a potential NIS 30 billion deficit.
- Prime Minister Netanyahu and Finance Minister Smotrich currently oppose the VAT hike but have not ruled it out as pressure mounts before the 2026 budget vote.
- Treasury officials warn that increased defense spending could undermine fiscal discipline, while a 1% VAT hike would generate about NIS 7.5 billion annually and have minimal impact on consumer prices.
- Netanyahu and Smotrich insist any defense budget increase must match the economy’s capacity, with Smotrich advocating for efficiency reforms and opposing broad tax hikes.
- Israel’s VAT rate remains lower than many European countries.
Source: ynetnews.com
Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.
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