The Israeli Cabinet approved a 2025 budget of NIS 607 billion and additional budget adjustment measures totaling NIS 37 billion.
The Treasury plan, which was withdrawn at the last minute from the cabinet-approved budget, includes cuts to tax incentives for advanced training funds, a freeze on the minimum wage, a freeze on national insurance benefits except for child allowances, and restrictions on foreign tourists. This included the abolition of value-added tax. On the other hand, in order to reduce the fiscal deficit to the target of 4.3%, it was decided to raise national insurance premiums for the general public.
According to the approved budget, the budget deficit at the end of 2025 will be 4.3%, 0.3% or NIS 16.5 billion higher than the target approved by Finance Minister Bezalel Smotrich. One reason for the widening deficit was the government’s last-minute decision to end the minimum wage freeze without finding alternative sources of funding. A planned NIS 700 million reduction in the Ministry of Transport’s budget was also cancelled.
Smotrich said the budget includes NIS 9 billion to support reservists who have served in the military over the past year. He added: “The main goals of the 2025 budget are to maintain national security and achieve victory on all fronts, while maintaining the resilience of Israel’s economy.”
“This budget will lead to a victory that will support the needs of the war and allow a strong Israeli economy to grow and prosper for many years to come.” ” The public sector and government agencies should take the lead, allowing everyone to share the burden without placing too much burden on any one sector. ”
Tax measures approved as part of the budget, such as freezing income tax rates and credit points, will be moved to an expedited legislative track and separated from the approval of the entire budget in parliament. This is targeted for approval at the end of this year, with the 2025 budget expected to be finally passed by parliament in January or February.
The biggest obstacle to overcome was the difference of opinion between the Ministry of Finance and the Ministry of Defense over the defense budget. The issue was resolved in a near-total victory for the Ministry of Defense, which received an additional NIS 20 billion that it had requested, exceeding the NIS 25 billion increase in the 2025 budget.
Published by Globes, Israel Business News – en.globes.co.il – on November 1, 2024.
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