Israeli Government Makes More Than It Spends for First Time in Decades

July ends with a surplus of 2.6 billion shekels.

Moti Bassok
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Bank of Israel Governor Karnit Flug holds up a newly designed 50 shekel banknote. September 10, 2014. Credit: Reuters
Moti Bassok

The government took in more than it spent last month, the first July in decades that this occurred. Last month's surplus was 2.6 billion shekels ($681 million).

The main reasons for the surplus for the month, which exceeded prior forecasts at the Finance Ministry, were the stepped-up pace of the purchase of residential property for investment, which accounted for more than a billion shekels of the surplus; a 23% jump in the pace of car sales and the payment of taxes on capital gains from the sale of companies.

The taxes generated by real-estate sales can be explained in part by investors seeking to seal deals before an increase in the purchase tax took effect as well as two major prior sales of income-producing property, taxes on which were collected in July. The total tax take by the government for the month was 25.4 billion shekels, compared to 21.8 billion in July of last year. It should be noted, however, that to the extent that it might have affected tax receipts in July of last year, for most of the month Israel was engaged in a war against Hamas and its allies in the Gaza Strip. 

Treasury officials were particularly pleased with the July tax figures at a time when the government budget for this year and next is still being ironed out for passage by the Knesset. (This year’s budget was not passed last year as elections intervened, with the current government talking office in May). There is concern among Finance Ministry officials that members of the current government coalition will attempt to get a chunk of the July surplus for needs that are a priority to the parties’ supporters, beyond what they have already been promised. 

Ministry staff therefore sought to underline yesterday that the second  half of the year is expected to require government expenditures beyond what was spent in the first half. In the absence of an official budget, the government has been operating based on the spending provisions for 2014, but the additional spending will include commitments made to the coalition partners in the new government and salaries for additional teachers’ aides for the first grade, who are being hired in an effort to address the problem of classroom overcrowding. 

In the first seven months of the year, the government collected 160.6 billion shekels, according to figures published yesterday by the Finance Ministry’s Accountant General. This indicates that potentially 275 billion shekels could be collected in the course of the year as a whole.

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