The professional staff at the Israeli Ministry of Finance is preparing a wide-ranging package of budget cuts and economic measures to fund the massive security costs arising from the war with Iran.
According to a report by Kan News, the proposals, expected to be presented to the government soon recommend combining structural cuts to the state budget with the cancellation of several benefits promised to the public in the 2026 budget, which passed its first reading in the Knesset last January.
Among the central measures under consideration are reductions to coalition funds that are not considered growth-promoting. This includes halting planned budget increases for ultra-Orthodox educational institutions and yeshivas. The professional team is also proposing to cancel certain tax benefits granted to specific localities, including communities in the West Bank and the southern city of Ashkelon.
In addition, the Finance Ministry is recommending scrapping a planned increase to the VAT exemption on overseas online purchases, as well as cancelling a scheduled expansion of income-tax brackets.
Finance Minister Bezalel Smotrich addressed the economic outlook earlier this week, telling reporters that the additional costs generated by the war will require raising the planned deficit target in the 2026 state budget.