The Israel Tax Authority is preparing a aggressive slate of fiscal measures for the incoming government, aiming to secure an additional NIS 10 billion in annual revenue through property taxes and real-time digital collection.
Shay Aharonovich unveiled the roadmap during the Contractors Conference in Eilat, framing these reforms as essential to address economic challenges, including the end of foreign aid.
The core of the strategy hinges on two primary mechanisms: a new property tax on unbuilt land and the transition to a real-time online VAT collection system. The Tax Authority intends to include some of its drafted tax measures in the Economic Arrangements Bill as part of the 2027–2028 state budget.
The property tax proposal seeks to force development on vacant lots by imposing an annual levy of 1.5% to 2.5%. The logic is straightforward: by increasing the cost of holding raw land, the government expects owners to either initiate joint-venture construction projects or sell their holdings to active developers. The exact rate remains subject to final legislative adjustments.
The second pillar—real-time VAT collection—represents a significant technological pivot. The plan requires the 18% value-added tax to be transferred directly to the Tax Authority the instant a transaction is completed, whether the payment is made via cash or credit card.
By eliminating the current delay in tax remittance, the Authority aims to strike at the heart of the shadow economy and the proliferation of fictitious invoices. This initiative alone is projected to add roughly NIS 7.5 billion to the state’s annual coffers.
Aharonovich emphasized the urgency of the political timeline, warning that the state cannot afford the instability of further electoral cycles.
“It is of paramount importance to urgently establish a coalition that can approve a two-year budget for 2027–2028. There are many challenges ahead, including the end of US foreign aid. Holding another round of elections would be a devastating blow to the economy,” Aharonovich told The Jerusalem Post. He added that if a government is formed in December, the budget could be finalized by March 2027.
Tax collection is precarious due to pending expirations. The current high purchase tax rates on investment properties, which range from 8% to 10%, are set to expire on February 28, 2027. Without legislative intervention, these rates will automatically revert to 5%, a shift that analysts warn could trigger a surge in residential real estate demand.
Beyond land and VAT, the Authority is casting a wide net to broaden the tax base. A position paper published this week proposes a new travel tax starting in 2027. This levy could add up to NIS 274 per passenger flight, with charges reaching as high as NIS 100,000 per departing aircraft, potentially generating NIS 1.1 billion annually.
These proposals arrive as the government maintains the tax hikes introduced in 2025. Measures such as the frozen indexation of tax brackets and credit points, increased National Insurance contributions, and the elevated VAT rate are slated to remain in effect through 2027. Aharonovich said that his team will finalize their full set of recommendations for the new government within two weeks, including specific policies regarding rental properties.
“Without an approved budget, it will be difficult to implement several tax reforms, especially mid-year,” Aharonovich said.
