The Knesset Finance Committee has suspended the approval process for the state budget and the economic arrangements bill, including the tax on three housing units and a series of tax measures supported by Minister of Finance Moshe Kahlon. All the upcoming committee meetings that were to have dealt with the housing tax, cutting corporate tax, and tax benefits for high-tech companies and the municipal property tax fund were canceled yesterday, with no new dates being set. The Finance Committee is due to approve the arrangements bill and the budget by December 12, so that the Knesset plenum can approve it in time. Even a short adjournment could cause a significant delay in approval of the budget, because coalition discipline is weak and a crisis is looming involving the arrangements bill on the one hand and the new public broadcasting corporation on the other.
Finance Committee chairman MK Moshe Gafni (United Torah Judaism) said that he had decided on a time out from the discussions in order to try to reach agreements with the Ministry of Finance on matters of substance. Knesset sources believe that Gafni wishes to link these agreements to the bill for encouraging employment of haredim (ultra-Orthodox Jews) currently under discussion in the Knesset Economic Affairs Committee. The measure, sponsored by Shas Party chairman Aryeh Deri, allocates 5% of civil service jobs to haredim.
The Ministry of Finance dismissed the suspension of discussions, saying that it was not important, and that other Knesset committees were working on schedule on the budget and the arrangements bill.
The talks on the issue of the third housing unit tax are focusing on proposals to add a means test to the tax. MK Eli Dahan (Shas), a close associate of Deri, recently said that adjustments according to tax brackets would be introduced into the bill, following criticism by owners of inexpensive housing units in outlying areas. These owners assert that the tax discriminates against them in comparison with owners of expensive housing in the central region. The municipal property tax fund is designed to redistribute revenue from the property taxes paid by government ministries in order to correct the deprivation suffered by poor local authorities having no government ministries in their territory.
Property taxes paid by government ministries are believed to amount to hundreds of millions of shekels annually. Another measure on the table that has now been suspended is encouragement for high-tech companies by cutting their taxes to 6% for large high-tech companies and 12% for other high-tech companies. The dispute over this tax measure is a result of the Manufacturers Association of Israel's demand that the reduced tax be extended to all exporting enterprises, regardless of whether they are knowledge-intensive.
Published by Globes [online], Israel business news - www.globes-online.com - on December 1, 2016
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