Financial Times: Israel is moving to increase taxes due to defense spending to support its war in Gaza

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Israel plans to raise about $60 billion in debt this year, freeze government hiring and raise taxes, as it nearly doubles its defense spending to support its war in Gaza, according to a senior finance official.

The Financial Times, pointed to the heavy losses that the conflict between Israel and Hamas inflicted on the Israeli economy, which shrank by about 20% on an annual basis in the last quarter of 2023.

The strike came, the Financial Times adds, at a time when the government mobilized a record number of 300,000 reserve soldiers, tens of thousands of people were displaced in the north and south of the country, and consumer spending declined.

About 150,000 Palestinian workers were also prevented from entering Israel from the occupied West Bank.

The Accountant General of the Israeli Ministry of Finance, Yali Rotenberg, also told the Financial Times, “The decisive factor in restoring the health of the Israeli economy is the demobilization of reserve soldiers”.

The Financial Times concludes by noting that the Israeli government, despite the worrying economic reality, is still threatening to expand its attack in Gaza to Rafah, and therefore plans to increase defense spending this year by 55 billion shekels ($15 billion), i.e. an increase of 85 billion shekels of the defense budget before the war.

Accordingly, the ministry plans to increase the value-added tax from 17% to 18% in 2025, while it will increase taxes this year and next, such as those imposed on smoking and banking services, freeze government appointments, postpone public jobs, and increase sector wages.

In this context, the American National Public Radio “NPR” website spoke, in a report issued last January, about the losses that the Israeli economy will suffer if the ongoing war on the northern front with Hezbollah expands.

NPR said that the war at its current level, rather than a full-blown war, had already caused economic losses in the northern regions, as settlements were emptied, businesses were closed, and production schedules were put at risk.

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