Minister of Finance Bezalel Smotrich met yesterday with the heads of the big banks and put forward a compromise. He proposed that the banks transfer NIS 3 billion to the state coffers this year and a further NIS 250 million in 2027. In exchange, he will abandon legislation on an excess profits tax and commit not to make any more demands.
This is a significant increase from the compromise plan formed in early March, which called for a one-time levy of only NIS 1.3-1.4 billion. Smotrich has more than doubled this demand, which is still much lower than the original plan included in the budget proposal - a 15% tax on excess profits, which was designed to yield NIS 1.5 billion a year and about 7.5 billion by 2030. From the banks' perspective, this is a savings of more than NIS 4 billion over the period - a strong incentive to close a deal now.
Last night, Smotrich met with senior officials from his office and the five CEOs of the largest banks as well as Banks Association CEO Eitan Madmon and the union's deputy director of external relations, Tibi Rabinovich. The meeting took place with the budget scheduled to be voted on in the Knesset next week, and amid the budgetary pressure created by the war in Iran.
For the banks, which ended 2025 with a record net profit of NIS 32 billion - an amount that exceeds the budgets of the Ministries of Welfare, Foreign Affairs and Interior combined - the transfer, even if painful, seems like a price that can be paid, if it does indeed remove the threat of permanent taxation from them.
This morning, Smotrich addressed the agreement with the banks in an official statement: "As I promised, we are going on a major move to tax the banks. The professional team at the Ministry of Finance reached an agreed outline with the banks tonight, within the framework of which they will transfer NIS 3 billion to the state treasury this year. Thanks to this step, we are both lowering taxes and maintaining the deficit of less than 5% as we planned."
Senior bank executive: A difficult feeling
The bankers were forced to accept the compromise that was presented. However, they left with a difficult feeling. A senior member of the banking system expressed frustration with the compromise outline that was reached and said: "On the one hand, we must congratulate ourselves for getting this off the table, but I have a difficult feeling this morning. I feel that the banks are being repeatedly hit from all sides, both in the Ministry of Finance’s excess tax and in the benefit programs worth billions of additional shekels that were formulated with the Bank of Israel."
According to him, "We do this out of understanding but still face constant criticism due to the profits that the system is presenting. There are other sectors that recorded extraordinary profits due to the war and have not been required to do so at all. Now the banks will pay a heavy tax that was brought forward to this year, in exchange for a promise that the issue will not be legislated in the future. However, such promises have been made in the past, and we have seen what came of them."
The banks did indeed pay tax on their excess profits for two consecutive years, as part of agreements reached with Smotrich in the past. However, in preparation for the current budget law, the minister promoted a broad examination to set a permanent mechanism that would impose such taxation on the banks, after which he planned to impose an excess tax, which led the banks, through the Banks Association, into a broad struggle.
"A national responsibility perspective"
This morning, the banks confirmed the agreement with Smotrich and stated that the Ministry of Finance and the banking system "jointly decided that at this time - from a perspective of national responsibility due to the war the country is facing and the significant fiscal needs associated with it, and with regard to the negative consequences that may arise from the proposed law, it is appropriate and necessary to create an alternative arrangement to the proposed taxation law." I
The statement added, "As part of the arrangement, the banks will receive regulatory certainty on the subject of taxation for the coming years."
Published by Globes, Israel business news - en.globes.co.il - on March 19, 2026.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2026.