Israeli Treasury Officials Launch Unofficial Comprehensive Tax System Review
The Ministry of Finance has formed an internal 'Committee of Three' to overhaul Israel's tax system, proposing labor tax cuts funded by eliminating historical exemptions.
The Ministry of Finance and the Israel Tax Authority have established an internal panel known as the "Committee of Three" to comprehensively review the nation's tax system. The committee comprises Tax Authority Director Shay Aharonovich, Budget Director Mehran Frozanfar, and Chief Economist Dr. Shmuel Abramzon.
Formed between May and June, this internal body operates without a formal government resolution or a ministerial mandate. Unlike traditional public committees that include external academics, this initiative was driven by professional bureaucrats capitalizing on a window of opportunity following the passage of the 2026 state budget and ahead of the upcoming elections.
Proposed Tax Reforms and Structural Overhauls
Despite generating significant media headlines, the committee's proposals largely recycle longstanding positions held by the professional civil service. The Treasury has consistently advocated for eliminating Value Added Tax exemptions—including those applied in Eilat, tourism, online foreign imports, and fresh produce—as well as scaling back tax benefits associated with the Advanced Training Fund.
Other recurrent proposals include imposing VAT on digital services, shifting the tax burden from labor and business income to consumption through broad VAT adjustments, and advancing behavioral taxes targeting pollution, sugary drinks, and single-use plastics.
Political Hurdles and Implementation Prospects
Underlying the committee's strategy is the presentation of a comprehensive reform package designed to reduce taxes on labor and business activity by dismantling historical tax exemptions linked to specific interest groups. However, analysts suggest that formulating tax policy independently of the executive branch may render the initiative largely irrelevant.
Political dynamics, coalition agreements, and the interests of various factions in the upcoming government are expected to dictate the viability of any major tax restructuring, casting doubt on whether the committee's recommendations will ultimately translate into legislation.
