Tax collection sets new record in October

State tax revenues set a new record in October for the second straight month, reaching NIS 30.1 billion. As reported by Globes, the record is attributable to NIS 11 billion-NIS 12b. in unexpected revenue from the taxation discount for beneficiary dividends granted by the state to controlling shareholders in private companies. These shareholders are being allowed to pay 25% tax on income classed as dividends, compared with 30%-33% previously.

As a result of the exceptional surplus revenue, the budget deficit has reached a new low. The cumulative deficit over the past 12 months (November 2016-October 2017) is 1.4% of GDP, less than half of the 2.9% 2017 deficit target.

Government spending since the beginning of the year totaled NIS 245.1b., 9.2% more than the corresponding period last year. These figures include an 8.8% rise in spending by civilian ministries and an unplanned 7.3% increase in defense spending.

Some of the NIS 6.5b. tax-revenue surplus will be deferred to 2018.

Tax revenue from dividends totaled NIS 17.5b., compared with an original forecast of NIS 6.5b. The state also received NIS 4.1b. in unanticipated one-time tax revenues from capital gains by Israeli shareholders in Mobileye, which was sold to Intel for $15.3b.

The Israel Tax Authority said VAT and income-tax refunds surged in October, compared with October 2016, as a result of differences in timing.

Using uniform tax rates, or excluding legislative changes, exceptional one-time events and timing differences in tax refunds, October tax revenues grew 16% in real terms, compared with October last year. Revenues from direct taxes were up 19%, revenues from indirect taxes were up 13%, and revenues from fees were up 12%.

Meanwhile, the unexplained spurt in defense spending is continuing, according to a budget performance report published on Wednesday by the Finance Ministry. The figures show a 10.3% rise in defense spending since the beginning of the year.

The Finance Ministry asserted in recent months that the rise was due to changes introduced this year in the distribution of payments to the Defense Ministry. But spending rose 7.3% even when these change are excluded, while the approved increase in defense spending in 2017 was only 0.7%, compared with the actual amount spent in 2016.

“Compliance with the budget agreements is being supervised and monitored, so that the Defense Ministry will remain within the approved budget framework during the year,” the Finance Ministry said.