State revenues exceeded the forecast by nearly NIS 9 billion in 2016, making the budget deficit 2.15% for the year, according to an initial estimate for the implementation of the state budge published today by the Ministry of Finance Accountant General department.
The budget deficit target was 2.9% of GDP, but the actual deficit was much less than the target for the second straight year. The 2015 deficit was also 2.15%, compared with a 2.7% of GDP target.
The difference between the actual deficit and the target in 2015 resulted from revenues exceeding the forecast by NIS 3.6 billion and spending falling NIS 3.3 billion short of the amounts allotted in the budget. In 2016, on the other hand, the different is almost completely attributed to revenues in excess of the forecast by no less than NIS 8.8 billion, while state spending was only NIS 300 less than the budgeted amount.
In view of these revenue figures, Minister of Finance Moshe Kahlon said at the end of last week that he would consider another tax cut towards the end of the first quarter of 2017.
State revenues totaled NIS 321.1 billion in 2016, compared with a NIS 312.3 billion forecast. Tax receipts totaled NIS 283.2 billion, 5.6% higher than in 2015 in nominal terms.
In retrospect, the 2016 revenue figures justify Kahlon's decision to cut taxes at the end of 2015, against the Bank of Israel's professional opinion. According to the figures, without Kahlon's decision to cut VAT by 1% starting on October 1, 2015 and corporate tax by 1.5% starting on January 1, 2016, state tax revenues would have been NIS 4.3 billion higher (a total of more than NIS 10 billion higher than the forecasts).
The Ministry of Finance noted that December vehicle imports contributed NIS 1.8 billion to surplus tax revenues. 80,000 vehicles were imported to Israel in December, triple the monthly average number.
The tax revenue figures indicate a continuation of the accelerated rise in state tax revenues at a rate of 6-7% a year.
One of the few categories in which tax revenues did not increase in 2016 was real estate, following a steep fall in the number of housing purchases by investors. Net revenues from land taxes totaled NIS 10.7 billion in 2016, the same as in 2015.
Betterment tax revenues totaled NIS 4.1 billion down 4.7% in real terms, compared with 2015. Purchase tax revenues also fell, despite the steep increase on purchase tax for an additional housing unit. The Ministry of Finance stated, "The increase in the tax caused a sharp decline in purchases of housing for investment in 2016, which offset the effect of the tax hike."
State revenues not derived from taxes and fees totaled NIS 38 billion in 2016, NIS 3 billion more than in 2015. The difference is attributable to National Insurance Institute deposits totaling NIS 23.2 billion, which were NIS 4.1 billion more than the projection, and defense aid grants, which totaled NIS 10.4 billion, NIS 1.4 billion more than expected.
Government spending, excluding the providing of credit, totaled NIS 347 billion in 2016, compared with planned spending of NIS 347.3 billion. This result was another achievement by Accountant General Michal Abadi-Boiangiu, who is finishing a 5.5-year term at the end of this month.
A breakdown of spending shows that spending by the social ministries grew 11.7%, compared with a planned 10.7% increase, and spending by the economic ministries rose 7.9%, compared with a planned 15.6% rise. Defense spending increased by 4.3%, compared with a planned 3.7% drop. The difference is attributable to the agreement between Kahlon and then-Minister of Defense Moshe Ya'alon on a multi-year defense budget.
The lower-than-expected budget deficit enabled the government to sharply cut back its debt raising in the domestic capital market. Government debt issues totaled NIS 19.7 billion in 2016, compared with a planned NIS 26.2 billion.
Published by Globes [online], Israel Business News - www.globes-online.com - on January 8, 2017
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