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State revenues from taxes in July were 10.9% lower in real terms than in the same period last year, and down 5.0% for the first seven months of the year.

The decline means that, based on the current figures, the state budget will have NIS 1 billion less available in nominal terms.

Nominal revenues from taxes have also been lower each month in 2008 compared with a year earlier, although 2007 is considered the Israeli economy's most successful year ever.

The Israel Tax Authority, headed by director Yehuda Nashradishi, is monitoring the decline in tax revenues with concern; the drop has occurred despite a rise in employment.

This presumably should have led to an increase in tax revenues, both from income tax and VAT.

The decline in state revenues from taxes is attributed to a drop in the collection of direct taxes - income tax and land tax. NIS 8.5 billion in income tax and land tax was collected in July 2008 - 16% less in real terms than in July 2007.

Direct taxes collected in the first seven months of the year totaled NIS 59.6 billion compared with NIS 64.9 billion a year earlier, a fall of 11.9%.

Income tax was affected mainly by a drop in revenues from corporate tax, which were down 21% in July compared with July 2007. Less income tax was collected in most sectors of the economy, including industry, trade and retail, which generate 55% of all taxes.

January through July 2008, however, saw a 4.5% increase in revenues from indirect tax - VAT, purchase tax and import tax - a total of NIS 50.5 billion compared with NIS 46.3 billion in the first seven months of 2007.

But real revenues fell 5.1% from July of last year, the first monthly fall this year.

The Tax Authority is maintaining an optimistic tone despite these worrisome figures.

Sources there say that at this point there is a surplus of about NIS 1 billion in tax revenues collected, compared with the target for 2008.

Despite fears of an economic slowdown, imports still rose in July by 22% compared to the same month last year. Imports of refrigerators, televisions, DVD players and VCRs all rose compared to 2007. Cigarette imports also were up.

On the other hand, imports of washing machines, dryers and dishwashers were down.

Spare part imports for cars also rose in July.

Altogether, Israel imported $5.5 billion in goods in July.