Finance Minister Avigdor Lieberman, who published this week the outline of aid to businesses affected by the omicron wave, did so while ignoring and hiding the plan from the tax authority and the budget department of the Ministry of Finance, and presenting it to them as a fait accompli. This is what Globes has learned.
The outline of compensation for the self-employed and businesses has undermined the stability of the coalition for a long time. Foreign Minister Yair Lapid and Deputy Prime Minister Abir Kara exerted political pressure to present him. But the presentation of the outline was delayed again and again, and behind the scenes there was a long series of discussions with members of the Budget Division and the Tax Authority.
What did Lieberman do? The Minister of Finance, who was not satisfied with the alternatives presented to him by the professionals, formulated the outline of the final compensation without them and landed it on them in surprise, just before he published it to the public. Some have argued that the change in the schedule and Lieberman’s early public announcement of the plan stemmed from the minister’s fear of leaks, whether from his people or from his coalition partners.
Either way, how did it happen that the professional echelon and the tax authority were completely excluded from the plan, how would the outline work and how much would it cost the state?
Lieberman thought otherwise
Earlier this week, Lieberman published the outline for business assistance for January-February 2022 due to the consequences of the Omicron wave. The outline is intended for the self-employed, small and medium-sized businesses with an annual turnover of up to NIS 60 million, which experienced a 35% decrease in turnover in January-February this year, compared to 2019.
The assistance ceiling for a single business was set at NIS 600,000, and an assistance track for new businesses that were opened in recent years was also determined on the basis of the compensation tracks in the previous assistance programs. Lieberman announced that the compensation will be given to businesses in one payment.
The professionals thought it wrong to give significant monetary compensation for a “transient event” like the Omicron Wave. They presented data showing that the economy continued to operate at high volumes and argued that from the experience of previous waves – also spot declines in compensated revenues followed by increases in economic activity due to deferred demand.
In addition, the professionals in the Ministry of Finance and the director of the Tax Authority expressed opposition in the discussions to the “solid cliff outline” and even offered their own alternative – to tie the aid to the businesses’ property tax payments. According to the proposal of the representatives of the Budget and Finance Division, the compensation was given to businesses that would prove a fourfold decrease in the turnover of their property tax payments. For example, a business that pays NIS 8,000 in property taxes and proves that it has run out of turnover will receive NIS 32,000 in compensation.
Contrary to the position of the Budget Division and the Tax Authority, Lieberman chose a position presented by an external source – Tax Advisor Yaron Gindi, President of the Chamber of Tax Advisers.
At the beginning of the discussions between the Treasury and the government and the self-employed representatives, Gindi presented an outline for business assistance that he claimed would be the only one to address the series of grants given in Corona, and in light of the fact that businesses did not have the option in the last wave. Will impose on businesses a bureaucracy that will impede the implementation of the outline.As stated, Finance Minister Lieberman adopted this outline and published it without informing the Tax Authority and the Budget Division that the discussions with them have ended.
Relatively low compensation
Where will the money come from? The Treasury intends to take the budget for the current aid outline from the remaining surpluses from the previous aid plans. During the discussions to formulate the outline, it became clear that there were three billion shekels left over from the previous compensation plan, with the estimates of factors from the negotiations to formulate the outline being that the total cost of the current plan will not exceed NIS 1 billion.
The amount, which is relatively low compared to previous compensation granted in Corona, is due to the fact that the economy continued to operate even under the limits of the Omicron wave, and only very certain industries suffered an injury of 35% or more required to apply for compensation.
Still open to negotiations
It should be noted that the way to implement the plan is still a long way off. Not only did the Treasury and the tax authority dislike the outline, the self-employed organizations protested with the publication of the outline against the threshold conditions that are too high for businesses to enter under the aid program. The continuum, which has been set at at least 35% damage to turnover up to an annual income ceiling of NIS 60 million, may well be open for negotiation when it comes to legislation in the Knesset.
The Finance Minister’s response: “The Minister of Finance is in ongoing dialogue with the ministry’s management on various issues, including providing assistance to businesses affected by the corona. In recent weeks, there have been several discussions with the professional echelon in the Ministry of Finance and the Tax Authority.”
A generous, stingy or just disappointing outline? | Amiram Barkat, commentary
The outline for self-employment presented by Finance Minister Avigdor Lieberman is disappointing and stingy, or rather surprising in its generosity – it all depends on the point of view. On the one hand, there is a considerable amount here, about a billion shekels (according to unofficial estimates) that are channeled to the benefit of a relatively small sector in the economy. On the other hand, what is a billion shekels compared to the huge surpluses in revenues that flow into the treasury?
On the one hand, if things had depended on the budget department it is very possible that the result would have been a much narrower aid package, if any. On the other hand, from the point of view of injured business owners in Corona, the aid this time comes without the Knesset safety net. Additional mines may be hidden in the outline, such as whether the tax authority can reclaim some of the money, under certain conditions.
And there is also a third party: of the ministers’ office and the advisers who were partners in formulating the package. It notes that the aid this time is targeted at small and medium-sized businesses and can reach much higher amounts than in the previous outline introduced during the corona. And more importantly, they say there, this is an opening proposal that will probably be softened in the Knesset.
Some of the self-employed representatives rushed to complain yesterday. “An attempt to play with numbers and set criteria designed not to compensate the businesses,” called the outline President of the Chamber of Independent Organizations Roy Cohen. Critics’ claims focused on the threshold requirement for a 35% drop in turnover in January-February (compared to January-February 2019). Why 35%? The self-employed demanded more lenient threshold conditions, such as the one set after Operation Eitan (25%) or the one set by Finance Minister Israel Katz in the summer of 2020 as a condition for receiving the grant for fixed expenses (25%).
But even if the current requirement is 35%, the road to approving the outline in the Knesset is still long. Based on past experience, it can be assumed that the Minister of Finance has quiet agreements with political partners who will strongly demand, and receive, softening the threshold conditions that they can present as an achievement for them. In such a case, the outline presented may turn out to be more than half a glass full for the self-employed in the economy.