Israel managed to cut its deficit to 33.2 billion shekel ($9.52 billion), or 3. 15 percent of its GDP in 2013, much better than expected, thanks to reduced government spending and higher tax collection, the finance ministry said Tuesday.

The government had set a target of 45.65 billion shekel (about $13.08 billion), or 4.33 percent of the GDP, at the start of 2013.

Over the past year, the Israeli government cut its spending growth almost by half and enforced a two-year austerity budget.

Israel posted a 5.7 billion shekel ($1.63 billion) surplus in tax collection, mainly due to the completion of the sale of the Israeli International Metalworking (also known as Iscar) to Warren Buffet's Berkshire Hathaway. The deal boosted government incomes by 3.3 billion shekel ($0.95 billion) in taxes.

An additional 1.4 billion shekel (about $410 million) came from the release of the so-called "trapped profits," referring to profits that multinational firms have accumulated for years under a loophole in the Israeli Encouragement of Capital Investments Law.

The law, originally aimed at encouraging multinationals to invest their capital in the Israeli economy, had allowed them to avoid tax payment as long as they have not distributed some of their dividends or invested their profits overseas.

Many companies had adopted a controversial practice and kept their profits "trapped" in the company's accounting balance sheets under various guises, such as loans for related companies.

In 2013, the government offered those firms generous tax discount in exchange for the release of the "trapped profits."