State tax revenues are again outstripping the Ministry of Finance forecasts, thereby bringing the budget deficit down to 2% of GDP. State budget performance figures for September published today by the Ministry of Finance show that state revenues from taxes and fees totaled NIS 22.6 billion, NIS 600 million than the revised forecast published by the Ministry only last month, following the rapid growth in state revenues in the preceding months.
The aggregate budget deficit in the past 12 months (October 2014-September 2015) amounted to 2% of GDP. The government budget deficit in its budget activity reached only NIS 3.8 billion in January-September 2015, compared with a NIS 10.9 billion deficit in the corresponding period last year and a NIS 32.7 billion annual deficit in the original 2015 budget proposal.
According to the proposed state budget for 2015-2016, the 2015 deficit will be 2.9% of GDP, with the Ministry of Finance planning to bring forward NIS 1.5 billion in spending from 2016 to 2015.
Government spending since the beginning of the year is 5.1% more than in the corresponding period last year, with spending by the civilian ministries up 4.1% and Ministry of Defense spending up 8.3%. Revenues in September were 7.3% higher in real terms than in September 2014, discounting legislative changes. Receipts from direct taxes soared 19%, while revenues from indirect taxes dipped 2.5%. The Ministry of Finance said that the fall in revenues from indirect taxes was caused by fewer working days in September because of the holidays, all of which fell in September this year (they were divided between September and October last year). The sharpest rise in tax revenues came from land taxes (discounting reimbursements), which totaled NIS 837 million, a 54% increase in real terms, compared with September 2014. The Ministry of Finance explained that there had been little activity in September 2014 because people were waiting for the cancelation of VAT on purchases of first apartments. Betterment tax proceeds skyrocketed 90%, and purchase tax proceeds climbed 36%.
Since the beginning of the year, state tax revenues have exceeded the original forecast by NIS 8.3 billion, with the forecast for 2015 as a whole being revised to NIS 269.4 billion as a result. An additional NIS 600 surplus over the forecast was posted in September, despite the revision of the original forecast.
The Ministry of Finance noted that cutting VAT from 18% to 17%, starting in October 2015, and the reduction of corporate taxation from 26.5% to 25%, starting in 2016, would reduce annual state tax revenues by NIS 5.7 billion, and by NIS 800 million already in 2015. Trend data for the past four years show a sustained 5% annual rise in tax revenues. From the end of 2011 to June 2014, state revenues grew by 4% a year, while the rate of increase speeded up to 9% from June 2014 to September 2015: 14% in direct taxes and 5% in indirect taxes.
Published by Globes [online], Israel business news - www.globes-online.com - on October 8, 2015
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