Israeli Banks Clash with Finance Minister Over New Tax Proposal
In a contentious development amidst Israel's ongoing economic struggles, the Israel Banking Association has accused Finance Minister Bezalel Smotrich of breaking his promise regarding a new tax on banks. The tax was initially set to cover the years 2024 and 2025 as part of the government's efforts to address the financial ramifications of the prolonged conflict in the Gaza Strip, which has significantly increased military expenditures. However, recent proposals to extend this tax into 2026 have sparked outrage among banking leaders.
The Banking Association has voiced its strong opposition to the proposed extension, emphasizing that it contradicts previous agreements made with the Ministry of Finance. In a letter to Smotrich, they highlighted that he had assured them the tax would be a temporary measure. The banks argue that extending the tax undermines trust and credibility between the financial sector and the government, raising concerns over the reliability of future negotiations.
This taxation issue arises from the backdrop of high profitability levels achieved by banks due to elevated interest rates, which the government cites as justification for the new tax proposal. However, banking officials maintain that the extension is inconsistent with the earlier settlement reached earlier this year, which was based on exceptional circumstances. As the draft economic plan for 2025 unfolds, the Banking Association is urging Smotrich to retract the proposal, emphasizing that the prior agreement should remain intact and not be revisited so soon after its establishment.
