Opposition MKs in the Knesset Finance Committee led by Yesh Atid MK Vladimir Beliak demanded on Sunday to hold new debates on dozens of clauses in the 2025 budget bill that have already been approved.
The demand came following reports on Saturday that the government intends to insert a new across-the-board cut (known as a “flat” cut) in the 2025 budget proposal, due to a decrease in expected national income as a result of certain measures that were not approved by the Finance Committee.
The flat cut is set to amount to just over NIS three billion – and will mean a cut of 4.3% from government ministries' budgets. The cuts are expected to impact the budgets of all ministries, including the Defense Ministry, National Security Ministry, Education, Health, and Welfare ministries, according to a draft of the government proposal on the cut.
The widespread cuts are necessary in order to keep Israel's deficit from ballooning if not all planned tax measures are enacted.
Following new tax measures that did take effect at the beginning of the year, Israel's deficit shrank to 5.3% of GDP, according to a first estimate by the Finance Ministry released last week, but this is still well above the ceiling set out in the 2025 budget of 4.9% of GDP.
The incomplete tax measures behind the need for the additional cuts include freezing the planned increase of the threshold for reporting on income from rent, mandatory reporting on rent income, enforcing cash laws on loans at financial institutions including gemach (communal lending funds), automatic tax reporting for Airbnbs, and twelve more steps that were planned to help fund the 2025 budget.
The coalition’s intention is to pass final voting of the Economic Arrangements Bill on Wednesday. The Economic Arrangements Bill is a bill that accompanies the national budget every year, and includes related legal amendments that are necessary for the budget to be carried out in full.
Bill likely to pass next week
The coalition then intends to pass the budget bill itself at the beginning of next week (likely on Monday, March 24, or early Tuesday morning). The Knesset goes on Passover recess on April 2, and the coalition intends to spend the remaining time to pass into law the revamped bill to change the makeup of the Judicial Selection Committee.
However, if accepted, the opposition MKs’ demand, which came in the form of a letter to Finance Committee legal advisor Shlomit Erlich, could lead to a significant delay in the budget proceedings. This could put pressure on the coalition, since the government will fall automatically if the budget does not pass into law by March 31.
This pressure was already visible on Sunday, as Finance Committee chairman MK Moshe Gafni (United Torah Judaism) put out a long statement in response to what he called “obscure officials” in the finance ministry, who he claimed had criticized him for failing to pass in his committee the necessary measures to fund the 2025 budget in its entirety.
After listing the central measures that were approved in the committee, such as the Trapped Profits Law, an additional surtax, a public sector salary freeze, and more, Gafni said, "As part of the lengthy and in-depth discussions held by the committee, it was decided, in agreement with Knesset members from all factions, not to approve some of the measures that were proposed."
"The Knesset is sovereign to decide on the legislative procedures that will be conducted in the best possible way,” Gafni continues. “These are measures whose impact on the state budget is marginal compared to the steps approved by the committee, and their aim is to protect the public, professionals, and businesses in Israel, with an emphasis on small businesses, many of which have suffered severe harm during the war and one of the toughest periods Israel has known," he continued.
The finance committee chairman went on to argue that the measures that the committee rejected were “minor” and concluded, "The committee and its chairman will not be deterred and will continue to prevent disproportionate harm to the public and businesses in Israel."
