Winners & losers in the Economic Arrangements Bill

A big boost for hi-tech funders, but no more free lunches or dinners for business travelers.

December 24, 2010 02:30
3 minute read.
Nanotechnology at BIU.

nanotechnology 311. (photo credit: Courtesy of BIU)

Although the big-issue clauses of the Economic Arrangements Bill tend to grab headlines, the vast majority of the massive bill that accompanies the state budget fly through committees without any great furor.

In this week’s various committee votes, ahead of next Knesset plenum voting, the hi-tech industry emerged as a clear winner, while individual businesspeople and shipping firms felt the pressure of economic reforms.

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The Knesset Hi-Tech Lobby claimed victory after three clauses, all designed to benefit its sector, made it into the bill.

• An amendment to the Research and Development Law will limit the amount of money that the state can demand back from a company that received funding from the chief scientist and then was either sold to foreign investors or sold on the stock exchange. The maximum level for the payments has yet to be determined – hi-tech lobby chairman MK Robert Ilatov (Israel Beiteinu) will finalize the sum through separate legislation that he will present to the Knesset in the coming months.

• A second clause, nicknamed the “Angels Law” and seen as beneficial to hi-tech companies, would allow three years of tax benefits for investors who have invested up to NIS 5 million in Israeli R&D-based firms.

• The third clause that brought a smile to the hi-tech lobby was an amendment to the Law for Encouraging Investment that will classify human resources as a recognized expense for investments.

Meanwhile, shipping companies’ lobbyists looked on grimly as the Finance Committee approved an amendment to the Business Limitations Law that would make it apply to shipping companies. Until the amendment is passed as part of the Economic Arrangements Bill, shipping companies have the right to coordinate prices and market shares, as well as to sign on to cooperation agreements that would otherwise have been restricted.

Shipping industry representatives are concerned that the amendment will discourage foreign shipping fleets from working in Israel, which is already considered a small market despite that fact that 99 percent of imported goods are brought to Israel through its ports.

Currently, the sole Israeli carrier – Zim Integrated Shipping Services – works in partnership with foreign companies to divide shipping routes for greater efficiency. The changed status would technically forbid such collaboration, although the Treasury has already said that shipping companies could receive an exemption from the law – after the new amendment passes – that would allow logistic cooperation.

Business travelers may have an even larger complaint regarding the Economic Arrangements Bill, which will cancel the recognition of meals as a tax-deductable business expense. The current law, which will be canceled under the current bill, allows travelers to deduct as business expenses meals eaten if they were working more than 10 km. away from their home or office.

The last time that the tariff for the reimbursements was updated was in 1985, to offer travelers a maximum reimbursement of NIS 7 per day – but when independently employed businesspeople appealed to the Finance Ministry earlier this year to reassess the amount, they were not expecting this outcome.

As part of the Economic Arrangements Bill, the Finance Committee voted for amendments that would remove meals from the list of recognized general expenses, as they are not directly related to the traveler’s ability to generate income. Meals will be deductible only if the traveler is forced to sleep away from home for the purposes of work and breakfast is included in the price of the hotel room.

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