In the midst of the political crisis, Finance Minister Avigdor Lieberman is determined to pass the state budget for 2023, along with the Arrangements Law.
The Ministry of Finance plans to pass an arrangement law next to the state budget that contains, according to the latest draft, about 30 reforms, but not many in new lines. We have heard about many of the plans over and over again in the past but have never implemented them, such as the establishment of metropolitan transport authorities, the vision of a million Israelis in high-tech or a travel tax that will replace the excise tax on fuel. There is no guarantee that the plans will pass this time, when the fragile political situation puts the approval of the entire budget under a big question mark.
The main dramas in the economic plan for the next budget year are in the field of real estate, such as the establishment of a fund that will encourage local authorities to absorb new residents.
There were those in the Treasury who said that this year the Arrangements Law would not be particularly significant, and certainly in the face of its predecessor to the 2021-2022 budget, which was rich in “flag” reforms such as easing imports, raising the retirement age for women, abolishing designated bonds and more.
The political tangle will prevail
The Ministry of Finance aims to approve the budget and the Arrangements Law in the government on June 17. After that, the reforms will be transferred to readings in the Knesset and preparation in committees. At the moment, when the coalition is having a hard time passing laws in the Knesset that should have a consensus, such as “dimensions for studies” for IDF soldiers, it is doubtful that they will be able to reach agreements on the budget. Then further changes will be made to the final wording of the Arrangements Act.
Traditionally, the Treasury also includes “goats” in the draft reforms, which are sacrificed during negotiations with the various parties. The laws that are split from the law usually remain on the floor of the courtroom, but sometimes also return for a second round. For example, some of the moves to combat black capital, which fell under the previous Arrangements Law, also appear this time, following the recommendations of the inter-ministerial committee published this week.
General and vague wording
Other reforms that sound familiar appear in one of the more interesting chapters in the Arrangements Law, the one that deals with reducing concentration and increasing competitiveness in the food products market. The bill prohibits the exclusive distribution agreements of large suppliers, and their obligation to obtain approval from the Commissioner for Competition in Merger with any other food supplier. These are measures announced by Finance Minister Avigdor Lieberman as early as March, and the public debate on them began last year.
At the headline level, this is a continuation of Lieberman’s struggle with the powerful food producers and importers that control the centralized market. But at the moment the draft is drafted in general terms, and until the decision-makers’ proposals are translated into regulations, there is no “meat” in them and it is difficult to know how much they will bind the suppliers.
See for example how this key decision is worded: “Determining a ban on a very large supplier to enter into exclusivity arrangements with a manufacturer or supplier of goods in a foreign country and determining a provision beyond two years in which adjustments to existing agreements can be made.” A very large supplier is defined as having a turnover of at least NIS 100 million. Does this mean that all existing exclusive distribution arrangements will be abolished? Will each brand be charged with at least two distribution channels? And how exactly will they do so without infringing on the property rights of the powerful importers, who will surely further exert pressure against the intent?
Accuracy of the final wording and subsequent regulations will be of crucial importance in the success of the program. Apparently, a parallel reform currently underway in competition law, a ban on harming parallel imports, is actually an improved version of past laws that failed the test of time. As early as 2018, a ban on harming a parallel importer was imposed as a temporary order, which expired and was not renewed. In retrospect, the wording of the previous law was too abstract and allowed companies to circumvent it. Only once has an attempt been made to enforce the law, against the importer Shestowitz, who owns the Colgate franchise, which acted against parallel imports of toothpaste.
How to give up excise tax
Under the heading of “strengthening the growth engines of the economy” are incorporated a number of measures in the field of infrastructure. Among them, expanding the definition of national infrastructure projects, especially in the field of transportation, accelerating the IDF in clearing minefields, easing regulation of certain electricity infrastructure, financial preparations for the construction of the Gush Dan metro, the “Innovation Promotion” program, and the most notable step in this chapter. For private electric transportation. “
The actual meaning is beyond paying tax by commute, instead of the excise tax currently imposed on fuel. This is due to the fear in the Treasury that the accelerated penetration of electric cars will dry up the country’s dairy cow, with the excise tax alone bringing about NIS 20 billion into the state coffers last year.
Another chapter of the law proposes that a bank with a small volume of activity may also control a corporation that is an insurance agent engaged in general insurance.
Another chapter deals with “reducing social disparities.” The chapter includes a plan to increase the number of ultra-Orthodox students studying English, mathematics and Hebrew. The ultra-Orthodox educational institutions will receive budgetary incentives from the state according to achievements. But the program will be valid only for boys’ educational institutions, not girls. One of the reasons for this is that the state is interested in encouraging mainly the employment of ultra-Orthodox men, whose proportion of workers is much lower than that of ultra-Orthodox women.
Arrangements Law: Real Estate | Arik Mirowski
Encourage authorities to build apartments, expand urban renewal even to ground-level ones
The incentive for local authorities to build more apartments than employment areas, streamlining the work of district committees, facilitating planning in multi-owner lands and including land-based buildings in urban renewal plans – these are the main real estate measures proposed under the government’s real estate economic plan for 2023. the plan.
The government has identified a number of major barriers to increasing the volume of construction, which are found in local authorities, planning and building committees, legislation and existing norms. One of the most notable proposals is the regulation of business property tax receipts in favor of residential building permits, and the transfer of funds from employment-intensive authorities to residential-petitioning authorities. Today, local authorities have a negative incentive for residential construction and an over-incentive to plan employment and commercial areas, due to the property tax rates of employment areas that are sometimes hundreds of percent higher than those of residences.
The plan to deal with the problem: NIS 2,000 to local authorities for each housing unit that receives a building permit in their area, as a grant to accelerate housing. The grant will be distributed from a designated fund that will be established – so that an authority that significantly increases its income from business property taxes will pay more to the designated fund and the money will be transferred to the local authorities where there is a lot of residential construction.
Another step in the area of property taxes: raising property taxes for short-term rented apartments in the style of Airbnb to the level of hotels.
It is further proposed that a plan that includes an addition of up to 30 housing units and up to 3,000 square meters of residential space will be a plan under the authority of each local committee.
According to the Planning and Building Law, in planning on private land that includes multiple owners, the consent of at least 75% of the owners is required to plan them. Now, it is proposed to reduce the consent threshold to 51% and see those who have not actively opposed as those who agree to the submission of the plan.
Another issue is the building permit, which in Israel sometimes lasts two years or more. In the past, it has been approved to establish a licensing track parallel to the regular track, in which an architect who is authorized as a permit holder will be able to issue a building permit instead of the licensing authority. For local committees where the licensing process is significantly longer than the average, it is proposed to allow the issuance of a building permit in construction complexes that include more than 40 housing units, to a national licensing authority based on the National Council subcommittee, and constitute parallel licensing authority.
And finally – today the pursuit of urban renewal mainly includes plans in areas where there is saturated construction. The thinkers of the government plan say that now is the time to advance a complementary step in favor of massive promotion of projects even in ground-level units.
Arrangements Law – Transport Assaf Zagrizak
The Minister of Transport will determine the model: the Treasury’s solution for the establishment of the metropolitan authorities
In the current draft of the Arrangements Law, the Ministry of Finance is leading the establishment of metropolitan authorities in a softened version, although one that will require their establishment. This is in contrast to the position of the Ministry of Transportation, which supports the establishment of “voluntary” authorities. In the previous Arrangements Law, the proposal to establish metropolitan authorities was dropped following opposition from the Ministry of Transportation and the Minister in charge, Merav Michaeli.
And here, in the current draft, the proposal is back, in a version that gives more independence to the Minister of Transport in determining the model, but still requires the establishment of such authorities within two years of the enactment of the law.
Another reform is the National Infrastructure Law, which is a kind of thin metro law for 10 infrastructure projects that will be chosen to be included in it, and will have a fast track with infrastructure companies.
Another reform will regulate the metro financing levy on property owners: every property owner, except the owners of one residential apartment, will pay tax for 40 years. The main issues will be the owners of employment offices, and commercial areas – the main beneficiaries of the economic benefits of the transportation system.
Regarding the question of the chances of passing the reforms – most of the transport reforms in the current arrangement law were dropped from the previous arrangements law and it is not at all certain that the government will have a majority to transfer the state budget, and even if so. Therefore, if the Ministries of Finance and Transport do not reach an agreed wording on the establishment of the metropolitan authorities in the forthcoming Arrangements Law it is doubtful whether the transport reform will pass.
Despite the fact that prioritizing national projects is an important goal, it will also draw significant objections and especially from the lobbies of mayors that the “whip” will take from them in promoting infrastructure projects and will surely encounter opposition from bodies like the Ministry of Environmental Protection and Antiquities.