The escalating war in Gaza and the mobilization of tens of thousands of Israeli reservists could soon impose new financial burdens on the public, senior Finance Ministry officials warned Monday, citing the rising cost of resuming large-scale military operations.
With a return to intense fighting in Gaza potentially costing more than NIS 15.4 billion ($4.1 billion), officials say significant budget cuts across all government ministries may be necessary, sharply impacting public services. Finance officials are also considering new taxes not included in the 2024 budget, in defiance of previous positions held by finance and tax authority leaders.
The Israeli military estimates that daily operational costs, which had recently dropped to about $22 million due to limited reservist deployment, could spike to over $70 million if multiple reserve divisions are mobilized and deployed throughout Gaza.
“The government isn’t discussing the financial toll, only the goals of the operation and the elusive defeat of Hamas, which has not been achieved in 19 months,” a senior Finance Ministry official told Ynet. “The cost of mobilizing tens of thousands of reservists for extended periods will be enormous, and will inevitably hurt economic growth.”
One economic official warned that the renewed offensive could risk further credit rating downgrades, following three major cuts earlier this year.
There are also concerns about the broader economic impact of removing 30,000 to 50,000 reservists from the labor market and higher education institutions. To cover the added costs, Israel’s budget deficit could rise from 4.9% to at least 5.1%, requiring a 3.5% reduction in government purchasing budgets.
Despite the urgent need, the Knesset Finance Committee has thus far declined to approve new tax proposals drafted by the Tax Authority. Finance Ministry officials say the government must press committee chairman MK Moshe Gafni to approve a package expected to generate at least $830 million. The plan targets black-market funds, the real estate sector, green taxes, and stricter enforcement of tax laws.
Measures blocked by Gafni—partly in protest of the proposed conscription law—are now being pushed again. These include mandatory reporting of all rental income, full transparency from platforms like Airbnb, a law requiring fuel receipts to qualify for deductions, limits on cash transactions at financial institutions, and changes to tax rules for affiliated companies.
Other proposals include increasing capital gains taxes on residential property sales, repealing benefits under the “trapped profits” law, and extending green tax policies beyond their current 2025 expiration date. Senior officials also support reinstating taxes on sugary drinks and disposable tableware, despite opposition from Finance Minister Bezalel Smotrich.
Officials stressed that the government will not be able to fulfill its 2026 budget promises, including tax reductions, without structural reforms. They urged the passage of an equitable conscription law, which could boost the economy and budget by an estimated $2.7 billion annually.
Opposition Finance Committee leader MK Vladimir Beliak (Yesh Atid) warned Monday that the government’s decision to expand reservist mobilization would collapse the 2025 budget, which was approved just six weeks ago.
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“The $1.1 billion security cushion has already been depleted,” Beliak said. “This isn’t just about direct costs—it will also drag down economic growth. About 20% of the reservists are employed in the high-tech sector, the main engine of Israel’s economy. That will lead to a sharp drop in state revenue later this year.”
Beliak predicted the government would breach its deficit limits and be forced into another round of 3–5% cuts to ministry budgets. “Education, welfare, healthcare, and infrastructure will once again take the hit,” he said.
He accused Smotrich of promoting “endless war and military rule in Gaza at a cost of tens of billions a year,” while ignoring the rising cost of living and continuing to allocate billions in coalition funds. “The Finance Minister and the government are repeatedly collapsing the state budget, damaging Israel’s economic reputation and harming its citizens’ quality of life. This recklessness must stop.”