Budget deficit fell to 2.1% in August

State tax revenues exceeded the forecast by NIS 2.6 billion in August. The Ministry of Finance today officially confirmed reports to this effect published in recent days.

The surplus reduced the budget deficit to an annualized 2.1%, leading Minister of Finance Moshe Kahlon to initiate tax cuts of 1% in VAT and 1.5% in corporate taxes. The Ministry of Finance said, "Some of the surplus is due to a one-time jump in collection."

Trend data over the past four years show a 5% ongoing average rise in tax collection. Tax proceeds in June 2014-August 2015 were up 9-14% for direct taxes and 5% for indirect taxes. State revenues from taxes and fees totaled NIS 23.4 billion in August 2015.

The most substantial increase in tax proceeds was in revenues from land taxes (net of refunds), which totaled NIS 1.3 billion, a real increase of 92% in comparison with August 2014. Revenues from betterment taxes and purchase taxes rose by similar rates. The rise in betterment tax revenues is attributable to four exceptional land deals (for industry and residential construction). The rise in purchase tax revenues is attributable to a large volume of land sales by construction companies in June, and in second apartment deals that took place in that month, while payment for some of those deals was forthcoming in July.

Income tax refunds totaled NIS 1.0 billion, up 19%, compared with August 2014. Net of legislative changes, revenues rose 9.8% in real terms, compared with August 2014. Revenues from direct taxes rose 7.9%. Tax revenues in August 2014 were higher than usual because of Operation Protective Edge in July 2014, when residents of the south were given the opportunity to postpone tax payments from July to August.

Published by Globes [online], Israel business news - www.globes-online.com - on September 8, 2015