Israel's Tax Revenue Slumps in First Two Months of 2013

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The government got off on the wrong fiscal foot this year, tax data from the Finance Ministry shows.

The Tax Authority said Thursday it took in NIS 38.4 billion in January and February, a 5.2% decline from the same period in 2012. The reason was a sharp drop in direct taxes, with income and property taxes tumbling 12.9% compared with a year ago.

Against that, indirect taxes showed a strong rise, with the value-added tax and customs duties bringing in 4.4% more than they did a year ago to NIS 18.5 billion.

The drop in tax revenue comes at a difficult time for the government, which still has no 2013 budget and may not get one until as late as June, if the Knesset approves the government’s request for a delay. In the meantime, the government is operating along the parameters of last year’s budget.

The problems will grow worse when the new government begins tackling the next budget, which has excess spending commitments of NIS 20 billion or more.

Despite the tax slump for the first two months, the figures for February were more encouraging, with the total tax take for the months unchanged from a year ago at about NIS 17 billion. Revenue from direct taxes was down 5.8% to NIS 8.5 billion from February 2012 while indirect taxes were up 6.5% to NIS 8.1 billion.

The February budget deficit grew to NIS 4.3 billion, part of which was due to unusually large tax refunds that month. In the first two months, spending by ministries climbed 5.4% from a year earlier to NIS 33.1 billion, with civilian spending up 7.2%.

Israel Tax Authority offices in Jerusalem.Credit: Lior Mizrahi

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