The draft laws for Israel’s 2025 budget were submitted to the Knesset, more than a month after the deadline set by law. The total budget for 2025 will amount to approximately NIS 706 billion, which is NIS 37 billion less than in 2024, reflecting cost-cutting measures caused by the war, The Jerusalem Post reports.
Despite the delay, this fact will not have political consequences. Finance Minister Bezalel Smotrych said that the budget would be approved by the end of January, and that the government would work on a “temporary budget” during January, focusing on 2024 spending.
Highlights of the 2025 budget include spending on public debt repayment of around NIS 136 billion and a planned budget deficit of 4.3% at the end of 2025. The budget includes funding for “reserve soldiers, compensation for victims, grants for businesses in war zones and across the country, rebuilding the north and south, and additional billions of shekels for the needs of the war on the military and civilian fronts,” according to a joint statement by Smotrich and Knesset Speaker Amir Ohana (Likud).
The budget also includes a number of tax increases, including a VAT hike from 17% to 18%, a freeze on public sector salary increases, and a controversial measure to tax “trapped profits” – corporate profits that are not invested or paid out as dividends and are therefore exempt from dividend tax. Ministry of Finance officials claim that taxing the “stuck profits” will close the loophole and increase national revenue by about NIS 5 billion annually. However, business leaders warn that this taxation will hurt companies and cause capital flight abroad.
These draft laws also came amid the government’s attempts to amend the 2024 budget for the third time. One of the proposals is to increase the 2024 budget deficit from 6.6% to 7.7% due to a delay in receiving US aid, which will not arrive until 2025. If the budget is not approved by the end of March, it will lead to new elections.
