The Authority is currently drafting several urgent tax measures for the next government, some of which are set to be included in the Economic Arrangements Bill as part of the 2027–2028 state budget. Shay Aharonovich, Director of the Tax Authority, revealed a portion of these upcoming steps during the Contractors Conference in Eilat.
At the top of the Authority's immediate agenda are two primary steps: Introducing a property tax on unbuilt land and implementing real-time online VAT collection, which will process tax immediately upon the execution of a transaction. Together, these moves are expected to generate an additional NIS 10 billion in annual revenue while closing existing tax loopholes.
Property tax and real-time vat rules
Under the property tax proposal, an annual rate of 1.5% to 2.5% would be levied on vacant land. Designed to incentivize development, the measure aims to encourage landowners to either utilize their land through joint-venture combination deals or sell directly to real estate developers. The final tax rate has yet to be finalized.
The move toward online VAT collection represents a far more dramatic shift. Under the proposed framework, the 18% VAT will be transferred directly to the Tax Authority the moment a transaction is completed, whether via cash or credit card. This immediate payment will subsequently be offset against the taxpayer's overall tax liability.
Aiming directly at the widespread issue of fictitious invoices, this initiative is estimated to boost annual tax collection by approximately NIS 7.5 billion.
Investment properties and flight levy
Alongside these two steps, the Tax Authority is working to address the high purchase tax rates on investment properties - currently set between 8% and 10% - which are scheduled to expire on February 28, 2027, unless legislative intervention takes place.
Should lawmakers fail to extend the current rate, the tax will automatically revert to 5%, a sharp reduction that experts fear could reignite soaring demand in the residential real estate market.
Budget warnings and political risk
During his address at the conference, the Director of the Tax Authority stressed: "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."
He added: "Within two weeks, we will finalize our recommendations for economic steps for the new government, including several tax measures regarding rental properties. The tax measures already approved in 2025 - including freezing the indexation of tax brackets and credit points, increasing National Insurance contributions, and the elevated VAT rate - will remain in effect through 2027."
According to him, "If government formation is completed during December, budget approvals can be finalized by March 2027, including the demand for an increased defense budget and several structural reforms. Without an approved budget, it will be difficult to implement several tax reforms, especially mid-year."
Additionally, the Tax Authority published this week a position paper recommending the introduction of a travel tax starting in 2027. The proposed levy could add up to NIS 274 per passenger flight, reaching as high as NIS 100,000 per departing aircraft. Total revenue from the travel tax is projected to reach NIS 1.1 billion annually.