Israeli finance minister proposes tax hike on bank profits amid Gaza war

Israeli Finance Minister Bezalel Smotrich proposed on Sunday a plan to increase taxes on bank profits from its current rate of 17% to 26% in 2024 and 2025 amid the ongoing Israeli onslaught on the Gaza Strip.

''We decided that according to the instructions of the VAT Law 1975, in tax years 2024 and 2025, a salary tax at a rate of 17% and profit tax at a rate of 26% will be imposed,'' Smotrich said in statements cited by Israeli business daily Globes.

The Finance Ministry forecasts that the increase in the tax rate will result in additional revenue of about NIS 1.4 billion ($378.4 million) in each of the next two years.

But the Bank of Israel warned that a tax targeting profits of a specific sector contradicts the principles of the taxation policy, creates uncertainty and might even deter investors.

The Finance Ministry estimates the cost of the Gaza war in the budget proposal for the year 2024 to be around 85 billion shekels ($24 billion), amid concerns of a significant rise in the budget deficit.

The ministry, according to a draft set for a vote on Sunday evening, mentioned that the cost could decrease to 70 billion shekels ($19 billion) if US aid is taken into account.

As per the budget proposal, the fiscal deficit ceiling will be raised from previous estimates of 2.25% of the Gross Domestic Product to 6.6%.

Israel has launched relentless air and ground attacks on the Gaza Strip since a cross-border attack by Palestinian resistance group Hamas which Tel Aviv claims killed 1,200 people.

At least 23,968 Palestinians have since been killed, mostly women and children, and 60,582 injured, according to Palestinian health authorities.