High tax collection moderates fiscal deficit

Israel's fiscal deficit narrowed to 3.3% of GDP for the twelve months to end-July, beating the 2026 target of 4.9%, thanks to strong tax collection. July deficit was NIS 4.8 billion; twelve-month deficit NIS 72.9 billion. State revenues totaled NIS 55 billion in July and NIS 328 billion year-to-date, up 11% from 2025. Spending rose 3.5% to NIS 373 billion. The Accountant General's Department cited growth in direct and indirect taxes, including a rise in consumption and a VAT payment on a high-value transaction.

Israel's fiscal deficit narrowed to 3.3% of GDP for the twelve months to the end of July 2026, a positive surprise driven by high tax collection, according to figures from the Ministry of Finance Accountant General Michal Abadi-Boiangiu. The 2026 deficit target is 4.9% of GDP. The July deficit was NIS 4.8 billion, and the twelve-month deficit reached NIS 72.9 billion. State revenues in July totaled NIS 55 billion, and NIS 328 billion for the year to date, an 11% increase over the same period in 2025. Government spending was NIS 60 billion in July and NIS 373 billion for the first seven months, up 3.5%. The Accountant General's Department reported that real tax revenues in July 2026 were 12% higher than in July 2025, with direct taxes up 14%, indirect taxes up 9%, and fees up 20%. The rise in direct taxes is attributed to growth in wage deductions and income tax from self-employed people; indirect tax growth stems from a substantial rise in consumption in May-June 2026 and a VAT payment on a high-value transaction. However, the article notes it is too early to say whether the fiscal picture will remain positive, as spending is expected to grow toward year-end, with civilian ministries underspending by 1.3% and the Defense Ministry spending 12.6% more.