Ministry of Finance: in July, the increase in tax revenues covered the increase in the defense budget

According to the Chief Economist and Auditor General of the Ministry of Finance, in July 2026, the current government budget deficit over the past 12 months remained unchanged at 3.3% of GDP, despite a significant increase in defense spending.

In July, there was a sharp increase in tax revenues to the state treasury, 12% higher than the figure for July 2025, taking into account inflation.

Since the beginning of the year (January–July), tax revenues have increased by 10% in real terms. At the same time, the budget deficit accumulated over the past 12 months remained at the same level – 3.3% of GDP (about 72.9 billion shekels).

The Ministry of Finance explains the increase in fees by a combination of several factors. Direct taxes increased by 14%, mainly due to withholdings from salaries and income taxes from the self-employed (their jump was 21%, while for companies it was only 3%). Capital market fees have also jumped sharply (up 21% from last July and 79% year-to-date).

Indirect tax revenues rose 9%, driven by higher private consumption in May-June and one large one-off VAT transaction. Separately, the ministry notes the base effect: the July 2025 figures were relatively low due to the decline in business activity during last year’s war with Iran, which explains the high percentage of growth this year.

Since the beginning of the year, government spending has amounted to NIS 373.6 billion, up 3.5% from the same period last year, while defense spending increased by 12.6% and spending by civilian ministries decreased by 1.3%. The Ministry of Finance emphasizes that the growth of expenses will accelerate in the coming months.