Gov't approves 417 million shekel aid package for Sderot, towns adjacent to Gaza

Residents will receive a 20% income tax credit, a 30% discount on residential property tax and other benefits.

Damage to a home in Sderot from rocket fire Thursday morning (photo credit: ISRAEL POLICE)
Damage to a home in Sderot from rocket fire Thursday morning
(photo credit: ISRAEL POLICE)
The cabinet on Sunday approved a NIS 417 million aid package for residents and communities around the Gaza Strip, which have been heavily affected by the barrage of Gazan rockets.
About half of the package will be specifically devoted to Sderot.
The government allocated NIS 226m.
of the package for 2014-2015, adding to the NIS 166m. it already approved for aid in 2014. An additional NIS 193m.
were set aside for use in 2016, so as to fund economic assistance beyond the short term.
As part of the package, residents will receive a 20 percent income-tax credit, a 30% discount on residential property tax, and a 24% discount on property tax for businesses.
The government also increased local industrial R&D funding by 25%, and allocated monies for student dormitories, investment incentives for an industrial zone and exemptions from Israel Lands Authority leasing fees.
Local authorities are set to receive NIS 31m. annually in special grants to finance security-related expenses.
The government is scheduled to finance five mental-wellness centers offering psychological and social work services, mainly for children affected by the conflict. The government has spent more than NIS 1.3 billion in past four years on similar economic “resilience” projects and NIS 2b. on building safe rooms in the area.
Meanwhile, the conflict has continued to take an economic toll around the country, particularly in the field of tourism.
Though most tourist groups in Israel have not cut short their stay, some 20% of organized tour groups have canceled upcoming trips, according to Ami Etgar, CEO of the Israel Incoming Tour Operators Association. Independent travelers have canceled in somewhat higher rates, but organized groups account for about 60% of tourism.
Many potential tourists are taking a wait-and-see approach, perhaps in the belief that the current outbreak of violence will be temporary and lead to a period of quiet.
Nearly all the cancellations came from groups scheduled to arrive in the near future, Etgar said, while groups planning to come beyond the end of the summer were still going strong.
“The extent of it is very much dependent on how long [the violence] will last,” he said. “People are saying ‘We don’t know what will happen in September, so let’s wait and see what happens.’” Tour operators are encouraging that trend by canceling fees on last-minute cancellations.
Israel broke its tourism records in 2013, with over 3.5m. visitors, and in the first half of 2014 was looking to outpace itself yet again. Tourism supports 200,000 jobs, both directly and indirectly, and in 2013 brought in some NIS 40b.
of revenues to Israel. It is still unclear what overall effect the security situation will have on this year’s numbers.
“It’s not at the level of panic, not at the level of hysteria,” a source at the Tourism Ministry said. “We are very optimistic about recovering because of our experience with Pillar of Defense,” the last major conflagration with Gaza, which took place in November 2012.
A hotel employee in Tel Aviv said that occupancy had dropped to 50% since Hamas started firing rockets on the country’s major cities, but, again, few cancellations had come in for future reservations.
“You notice a big difference from last week when we were full, but the cancellations are mainly for right now. People are waiting to see what happens,” the employee said.
A similar trend is clear in student programs.
Moshik Toledano, the director of Young Judaea Israel, said that thus far the rockets haven’t affected enrollment for its Year Course gap-year program, and participants in its summer programs were staying strong.
“I don’t have any cancellations for groups that are supposed to arrive in September,” he said, noting that the situation was likely to calm down by then.
“We are in constant contact with the parents, who remain confident in our conservative security policy.”
Incoming airline traffic hasn’t dropped dramatically, according to an airline industry source. In fact, the source said, British Airways may soon announce two new weekly flights to Israel, adding to the three new flights it recently announced. That would bring its overall total to 19 weekly flights to Tel Aviv.
Even the markets seem to have accepted that such outbursts of violence may be short-lived.
“Domestic markets have demonstrated maturity,” said Rafi Gozlan, chief economist at IBI Investment House. “While there is always a chance that ‘this time it will be different’ and the outcome will be more severe, the chances of such a scenario remain small at this point.”
A sudden, sharp devaluation in the shekel may change that, he added.