Israel Marks Independence Day with $1.7 Billion Budget Surplus

Contrasting dramatically with the situation 58 years ago, the government can celebrate this Independence Day with a NIS 7.7 billion budget surplus.

Scott Shiloh , | updated: 16:13

From January 1 to the end of April, the government took in NIS 7.7 billion ($1.7 billion) more than it spent. The unusual budgetary surplus was, ironically, partly the result of the government operating without a budget for 2006.

A budget has yet to be approved for the current fiscal year, because new elections were called before the Knesset was able to pass one. As a result, the entire government is running as if the 2005 budget is still in effect. Each month, the Finance Ministry simply allocates each ministry 1/12 of last year’s budget.

Another reason for the rosy fiscal picture was a larger than expected increase in tax revenues for the January to April period. Tax collection was up by 17% in nominal terms over the same period last year.

The country’s growing economy, expected to expand by over 4.5% this year, is a major reason for the added tax revenue.

The surplus may not necessarily auger relief, however, for taxpayers in Israel where taxes are among the highest in the developed world. Commentators suggest that the surplus will only make it easier for Prime Minister elect Ehud Olmert to pay out the billions of shekels he promised his coalition partners for joining his new government.