Finance panel delays college scholarship tax discussion

“This is important victory for Kadima, hard blow to government’s cynical, heavy-handed attempt to tax students’ scholarships, Kadima spokesman says.

StudentsAtHebrewU311 (photo credit: Ariel Jerozolimski)
(photo credit: Ariel Jerozolimski)
Kadima claimed its first victory over the budget on Tuesday when the Knesset Finance Committee voted to separate a proposed tax on students’ scholarships from the rest of the budget, effectively delaying and possibly preventing the initiative’s passage.
“This is an important victory for Kadima and a hard blow to the Netanyahu government’s cynical and heavy-handed attempt to tax students’ scholarships for the first time in the history of the state,” said Kadima spokesman Shmulik Dahan. “We in Kadima, who first revealed the government’s attempts to enforce this tax, now emphasize that justice has been done, and any attempts by the government to stick their hands into students’ and researchers’ pockets by way of the Economic Arrangements Bill will fail.”
The decision to separate the tax from the rest of the budget package came during a Finance Committee hearing Tuesday. Committee members expressed their anger that the Israel Tax Authority had planned to unilaterally place restrictions on sources of students’ grants, while justifying the restrictions on a concern that employees were essentially being paid illegally through tax-free scholarships.

Finance Committee chairman Moshe Gafni (United Torah Judaism) said that he intended to space out the hearing, initially meant to be part of the Economic Arrangements bill, in an attempt to allow for greater discussion and examination of the subject and to ensure that students and researchers are not critically harmed by the proposed tax.
Kadima MKs Yoel Hasson and Yohanan Plesner immediately backed up Gafni’s decision, with Hasson proclaiming that “this is a moment of greatness for the Finance Committee.”
Coalition member MK Zevulun Orlev (Habayit Hayehudi) backed up Plesner and Hasson, protesting the proposal’s attempt to place restrictions on who could and could not grant tax-free scholarships.
“It does not matter who gives the scholarship. What is important is who receives it and for what goal – that should be the only criteria,” he said.
Orlev, who up until two weeks ago led the Education Committee, said that such scholarships were critical in guaranteeing Israel’s continued excellence in higher education and research. Israel, he chided, is still behind other developed countries in providing benefits for students. Any violation of the use of nontaxable scholarships, he said, should be treated individually, through criminal prosecution for the guilty parties.
“Nobody has any interest in allowing people to take advantage of the law in the name of higher education, but the way that we are being asked to amend the law will hurt research and academic excellence,” warned Orlev.
The plan to tax students for up to 25 percent of certain scholarships received has been a controversial issue since it was revealed as part of the Economic Arrangements Bill two weeks ago. Removing the proposal from the massive bill will undoubtedly make it harder for the government to pass the plan – coalition discipline on the Economic Arrangements Bill and the budget is much tighter than on individual legislative initiatives, and so it is nearly impossible to strike down individual clauses.
With a strong cross-aisle consensus among the MKs at the hearing, Gafni concluded that the topic of taxing scholarships was not urgent for the government, and thus did not have to be passed within the framework of the Economic Arrangements Bill. Instead, he argued, the issue could be discussed at length in January after the committee completes its work on the budget.