Economic arrangements bill approved by Finance Committee, paving way for budget

The committee approved various portions of the bill one-at-a-time over several days, and parsed out a few particularly controversial sections for later approval or approval by other committees.

Moshe Gafni
After months of wrangling and days of marathon sessions, the Knesset Finance Committee on Monday approved the economic arrangements bill, clearing one of the last major hurdles for passing the 2015-2016 budget.
The bill contains the economic policies associated with the annual budget, making it one of the central pieces of economic policy legislation.
The current bill included many previously announced, but not yet legislated, proposals, including the creation of a government funded savings account for children, housing reforms meant to tackle the housing crisis, reforms to health care spending, regulation of natural resources, and payouts to children orphaned by terrorism, among others.
The committee approved various portions of the bill one-at-a-time over several days, and parsed out a few particularly controversial sections for later approval or approval by other committees, such as unemployment benefits for the self-employed and certain tax reporting requirements.
Committee chairman MK Moshe Gafni (UTJ) noted that the grueling process yielded a slew of updates, amendments and changes to the bill, repeating his mantra that the committee is not a rubber stamp.
“The arrangements law is coming out completely different from the one that arrived to us, and I am pleased about the accomplishments we have made in coordination with all the members of the committee, coalition and opposition, that worked together to arrive at all these achievements for the public,” he said.
The reform undid some of the cuts to child allotments passed under former finance minister Yair Lapid. It raised monthly payments from NIS 140 per child to NIS 150 for the first child and NIS 188 for the second, third and fourth children. The policy will be a boon to large families, as it will be paid retroactively through the beginning of 2015.
The state will also start paying into savings accounts for children, which their parents can add to without penalty and that the children will have access to upon reaching age 18. The committee stripped out earlier requirements that incentivized later withdrawals.
In housing, the bill reduced taxes on selling private land for residential building and lopped 0.5 percent of Construction Ministry-backed mortgages (from 3% to 2.5%). It also opened up land registration to minorities.
Three years after the recommendations of the so-called Sheshinski 2 committee on regulating and taxing natural resources, the committee pushed the central policies through. The recommendations create a windfall profits tax of up to 42% for profits earned from mining and selling natural resources, such as potash.
An amendment to the policy pushed much of the new tax revenue toward a fund for developing infrastructure and promoting job growth in the Negev.
Another controversial section put some of the onus for pension fund management fees on employers, drawing criticism from business groups such as the Federation of Israeli Chambers of Commerce.
The group argued that the change would cost Israel’s employers NIS 400 million a year, which amounts to 5,000 jobs. The plan also cut back benefits from high-earner pensions.
On fiscal issues, a new provision would ban spending outside the budgetary framework. Starting in 2017, spending bills will have to include funding sources, whether new revenues or other spending cuts, that accord with fiscal targets for three years. They would similarly have to stay within a spending limit already set by law.
The committee was scheduled to begin discussing the budget bill on Monday night. Both the budget and economic arrangements bill must pass second and third readings in the Knesset by November 20th.
Failure to do so would trigger early elections.