Budget data for July and for January-July 2016

August 10, 2016

Bottom lines:

FISCAL POLICY: The very comfortable fiscal situation extended through July, with the 12-month trailing deficit ratio to GDP remaining at 2.2%. The deficit for July was NIS0.5bn, and for the first seven months of the year totaled NIS2.6bn, double the amount for January-July 2015, but still only a sliver of the NIS35bn projected deficit for 2016.

POLITICAL ECONOMICS: With the deficit remaining low and revenues still running high, the government will feel confident that the ambitious two-year budget it approved in August will meet its targets. However, independent analysts are still concerned that the budget is based on overly optimistic assumptions about revenues in 2017 and 2018.


  • Tax revenues for January-June totaled NIS168.7bn, up by 4.9% on a nominal basis from January-July 2015, despite the cuts in both VAT and corporate income tax for this year. Revenues in the first seven months were almost exactly in line with the Treasury forecast for this period.
  • Revenues from indirect taxes rose by 5.7% in real terms over July 2015, and by 7.5% for the January-July period over the same period in 2015after adjusting for the cut in VAT.
  • This increase is being driven by a continuing boom in vehicle imports, which were 18% higher in December 2015-July 2016 compared to December 2014-July 2015 — far above the trend increase of 5% per annum.
  • Direct taxes generated only a 1.8% in July 2016 over July 2015, after adjusting for the cut in rates. Deductions from salaries rose by 4% and advance payments from self-employed persons jumped 13.8%, but corporate income tax receipts fell 6.8% from July 2015.
  • Property tax receipts dropped sharply from July 2015, reflecting the unusually high level of activity in the real estate market in July last year. However, for January-July, these taxes posted an 8.6% gain over the same period in 2015.
  • Total government spending in January-July was still below target, at 54.8% of the full-year budget.
  • Spending by government ministries was up by 8.3% over January-July 2015. Civilian ministries’ spending is up by over 10% so far this year, in line with the budgeted increases. Defence spending is also up, by 2.9%, although it was initially projected to fall — but has now been granted an increase.

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