May Sees Big Drop in Tax Revenue

Tax collections plunge 3.8% in inflation-adjusted terms compared with May 2011.

For the fourth straight month, tax revenues plunged in May, and the budget deficit is growing rapidly.

Tax collections fell 3.8% in inflation-adjusted terms compared with May 2011, reported the Finance Ministry on Tuesday. Total tax revenues for the month were NIS 18.3 billion, down from NIS 18.7 billion in May 2011.

The state has a hole of almost NIS 3 billion in revenues compared with the treasury's forecasts for the first five months of the year, above and beyond the planned budget deficit.

The Finance Ministry has been forced once again to lower its tax revenue forecasts for 201, down from NIS 232.2 billion to NIS 221 billion.

But the problem is not only a drop in tax revenues: Government spending is up too. May spending was NIS 22.2 billion - up some 10% from May of the previous year. Government spending for the first five months of the year is up 6.1%, compared with the same period of last year, to NIS 86.6 billion.

The budget deficit for the first five months of 2012 was NIS 4.5 billion - way up from NIS 900 million for the same period last year. The planned deficit for the whole of 2012 in the original budget was NIS 18.4 billion, but the most recent estimates see it reaching NIS 29.7 billion this year.

These figures are doubly important as they will serve as the basis for formulating the 2013 state budget, which the treasury will present to Prime Minister Benjamin Netanyahu soon.

One tax that did bring in much more last month was fuel tax, which rose 10% in real terms in May compared to the same period last year, as fuel prices have risen.

Direct taxes, such as income tax and real estate taxes, brought in NIS 8.8 billion in May, down from NIS 9.3 billion in May 2011, a drop of 7.3% in inflation-adjusted terms. A large part of the drop was a surge in tax refunds in May. Indirect taxes, such as VAT and customs, were down slightly in real terms to NIS 9.1 billion.