On Wednesday, Prime Minister Benjamin Netanyahu and Minister of Finance Yair Lapid reached a compromise on the mechanism for distributing tax breaks to communities, two days after they appeared to be on a collision course on the issue. On Sunday, they will submit to the cabinet Lapid's original proposal with higher compensation for the communities that Netanyahu wishes to support.
In addition to the five criteria for tax breaks that Lapid decided on, at Netanyahu's demand, preference will be given to two groups of communities: communities within two kilometers of a border with a country with which Israel has no peace treaty; and municipalities in the south.
Three weeks ago, Lapid announced that he had drawn up objective criteria for eligibility for tax breaks for communities, in line with a ruling by the High Court of Justice that the list of eligible communities not be arbitrary. The proposal makes 230 more communities eligible for tax breaks, including Arad, Beit She'an, Eilot, and Hatzor Haglilit, while communities considered wealthy, such as Kfar Vradim, had their eligibility revoked. Given that the budget for the tax break is limited, more eligible communities means less money for each one.
As a result, the most problematic issue - the budget for the tax break - has not yet been solved. The budget is currently NIS 850 million, but Netanyahu, under heavy pressure from municipalities which will be affected by expanding the eligibility, wants to sharply increase it.
The Prime Minister's Office and Ministry of Finance put off a decision, stating the matter will be decided as part of the budget discussions, which have not yet begun. This means that the struggle between Netanyahu and Lapid on the tax break is not yet over.
Published by Globes [online], Israel business news - www.globes-online.com - on February 13, 2014
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