Close? Vacations? January tax collection reached its peak

The Coronavirus pandemic does not cease to generate surprises, both economically and financially. Unemployment and fiscal deficits are at record levels, economic growth is negative, and entire sectors survive through government aid, yet the state’s coffers are overflowing with taxes. Yes, it’s true: the tax collection numbers for January were among the strongest in years. It is true that revenues from indirect taxes have decreased: for example, taxes on fuel resulted in the country being 20% ​​lower in January 2021 than in January 2020, a direct result of the third shutdown. VAT collection also decreased by 5%, which corresponds to a decrease in consumption and an increase in the number of book workers. But against the expected decline in indirect tax revenue, there was a double-digit rise in revenue from income tax and corporate tax: both made 13% more in January 2021 than they did in January 2020, before the outbreak of the coronavirus pandemic, making the whole milestone. Most impressive. The outstanding figure is corporate tax collection, which increased by at least 70% compared to January of last year. In numbers, we are talking about 5.6 billion shekels compared to 3.3 billion shekels. The January 2021 figure is a multi-year climax, and the Accountant General Department at the Ministry of Finance is trying to understand what lies behind it. The economists we spoke with raised various possibilities, but found it difficult to point to any one convincing explanation. It can be assumed, for example, that like many ordinary citizens, companies in Israel have also saved large sums of money in expenses due to the closure. Trips abroad, for example, or energy spending saved by office closures and home work. These savings translate into higher profits for tax purposes, and thus higher tax revenues. In the Israel Tax Authority, the increase in revenue is attributed, among other things, to a successful year for financial companies. The corporate tax numbers may be the most prominent, but there has been improvement elsewhere as well. Income tax collection from wage workers increased by 2.8% compared to January 2020, despite hundreds of thousands of people being sent on unpaid leave during the third lockdown. Public sector salaries have continued to rise in 2020, by just over 1%, but the 2.8% growth in tax collection still cannot be explained without raising wages in the private sector. There was also a slight surprise to the Ministry of Finance regarding the collection of purchase tax on imports. After increasing the vehicle tax in January, the Ministry of Finance forecast a drop in revenue, as many people introduced car purchases through December. So Finance Ministry officials rubbed their eyes when they saw the January numbers: Revenues rose by at least 25% compared to January 2020. “We still don’t know how to explain it all, but there is no doubt that there are many positive signs,” said a source at the Finance Ministry. Posted by Globes, Israel business news – en.globes.co.il – on February 9, 2021 © Copyright Globes Publisher Itonut (1983) Ltd. 2021