Following complex negotiations, Israel's finance officials and banking sector have agreed to a ILS 3.25 billion one-time payment deal that will reduce the country's deficit to 4.9% of GDP in 2026, replacing a proposed five-year tax mechanism as the nation manages its fourth year of wartime spending.
Israel’s Ministry of Finance and the Banks Association finalised a compromise deal that will see banks transfer ILS 3.25 billion to the state in 2026 and an additional ILS 250 million in 2027. The deal replaces a planned five-year taxation framework with a one-time payment.
In return, the proposed legislation to impose an extra tax on banks’ excess profits will be abandoned.
Most of the funds will arrive in 2026, with the entire amount allocated to deficit reduction. This will bring Israel’s budget deficit down to 4.9% of GDP, according to the Budget Commissioner’s recommendation, supported by senior finance officials and approved by the Finance Ministry.
The agreement comes as Israel navigates its fourth consecutive year of wartime fiscal challenges, having accumulated hundreds of billions of shekels in expenditures. Despite these pressures, officials emphasised their commitment to conservative fiscal management.
Earlier, Israel’s Ministry of Finance has proposed a temporary tax on banks’ excess profits and approved a higher tax-free import threshold in an announcement on 23 December 2025.
