New Taxes?
Israel's government approves first budget in three years

Health Ministry to receive huge increase in spending in 2021-2022 budget, after government failed to pass spending plan for three years.

David Rosenberg , | updated: 8:54 AM

ראש הממשלה נפתלי בנט
ראש הממשלה נפתלי בנט
צילום: שלו שלום/TPS

The Israeli government voted to pass a spending plan Monday morning, following three years of deadlock which prevented the passage of a state budget.

Following marathon talks overnight, the government reached an agreement on a spending plan for 2021 and 2022 early Monday morning. Shortly thereafter, ministers voted to back the budget.

“Overall, all of the disagreements on the budget have been settled and we’ve reached an agreement,” said Ram Belinkov, director-general of the Finance Ministry.

No budget has been passed by Israel’s government since 2018, and the failure of the Netanyahu-led coalition to pass a spending plan last year led to its collapse and snap elections.

During negotiations within the government overnight, Health Minister Nitzan Horowitz (Meretz) demanded significant increases in funding for his ministry, threatening to bring down the narrow coalition government if his demands were not met.

As part of the spending plan, the government will allocate an extra two billion shekels ($619,717,000) to the Health Ministry.

The government reconvened at 7:00 a.m. Monday to finalize the new spending plan, sending the budget plan to ministers for formal approve Monday morning.

Following the government's approval of the spending plan, the budget will now be sent to the Knesset for a vote. Given the government’s razor-thin majority, last-minute challenges to the budget’s passage in the Knesset are likely.

In addition to the increased Health Ministry budget, the new spending plan will, if passed by the Knesset, impose new taxes aimed at slowing the growth of the massive state deficit.

Already larger than the government’s target prior to 2020, the deficit ballooned following the coronavirus lockdowns and bailout grants to citizens and businesses.

Finance Minister Avidgor Liberman (Yisrael Beytenu) has pushed for new taxes on soft drinks, disposable dishes and utensils, as well as on consumer goods imported from online retailers like Amazon. Currently, online purchases from abroad have been exempt from Israel’s Value Added Tax, so long as the total value of the purchase is below $75.