Even as the country plunges into a coronavirus-instigated economic crisis, Prime Minister Benjamin Netanyahu received personal tax benefits from parliament this week, to the tune of hundreds of thousands of shekels.
The timing of the step has elicited the rage of many newly jobless Israelis, some of whom cite the dizzying contrast as proof the millionaire premier is removed from the increasingly financially strapped public.
Liron, a hairdresser in the upper-class Tel Aviv neighborhood of Ramat Aviv, called the decision by the Knesset Finance Committee on Tuesday “disgusting.”
“It is go’al nefesh,” he said, as he carefully applied dye to a customer’s locks. “Especially in light of the fact that there are so many people without a job now.”
Liron, who is among the lucky ones who got their jobs back after being furloughed when the economy was shut down in March as the virus spread, voted for Benny Gantz’s Blue and White party in the March elections. Gantz has now formed a unity government with Netanyahu, and Liron said he is disappointed and feels his vote has “gone into the trash.”
Liron’s disgust with the prime minister’s new perks is likely resonating widely with some
800,000 jobless Israelis, who have seen their income and prospects evaporate as the coronavirus wreaks havoc on the economy. Unemployment surged to a peak of 27.8% on May 10, with over 1 million people unemployed or on unpaid leave, as lockdowns and social distancing restrictions were instituted in response to the pandemic.
Even as Israel has eased the restrictions and lockdowns, unemployment rates that were below 4% before the pandemic struck were still estimated at a whopping 20.8% on June 23.
The economy is expected to contract in 2020 by some 6.2%, or by 8.3% if there is a second wave of the virus, compared to last year, an OECD report said earlier this month.
Against this dire economic outlook, the Knesset Finance Committee on Tuesday gave the go-ahead for Netanyahu to receive a tax break reportedly worth close to a million shekels ($270,000) on payments, services and benefits he got from January 2009 to December 31, 2017.
The perk is for fringe benefits that Netanyahu, already one of the nation’s wealthiest lawmakers, got from the state.
These include renovations to his private home in Caesarea, including fixing the pool and gardening work, and use of the bulletproof prime ministerial car, on which he would normally need to pay taxes.
In 2018, it was legislated that the prime minister’s use of his official vehicle would not be taxed, and that the state would bear the costs of his private residence in addition to the official residence in Jerusalem, and the prime minister would not be taxed on these benefits.
Tuesday’s legislative clauses pertain to the period prior to the passage of the 2018 law, as the Tax Authority issued a bill to Netanyahu requiring him to pay taxes on the perks he received between 2013 and 2017.
Netanyahu ally MK Miki Zohar told the Finance Committee on Tuesday that paying the taxes would have left the prime minister — estimated last year by the Israel edition of Forbes magazine to be worth NIS 50 million (approximately $14 million) — “financially crippled.”
“It is unfathomable that the prime minister should pay half a million shekels in taxes,” Zohar said at the meeting, The Marker business daily reported. “Whoever requires this is seeking to personally hurt him.”
A representative of Israel’s Tax Authority present at the meeting was unable to say whether former Israeli heads of state had benefited from similar breaks.
Netanyahu’s current monthly salary of NIS 56,345 (USD 16,368), of which he takes home an estimated net NIS 28,000 (USD 8,134), according to financial website Calcalist.
All of his and his family’s expenses at his residence in Jerusalem are paid for, including electricity, municipal and food bills, as well as cooks, security personnel and drivers.
The state also foots the bill for the costs of Netanyahu’s private home in Caesarea, which in 2015 amounted to NIS 298,000 (USD 86,565), according to Calcalist.
The Tuesday measure passed 8-5, with one abstention from opposition Yamina MK Bezalel Smotrich who protested the “unfortunate timing” of the vote.
Lawmakers from the Blue and White party, partners in the prime minister’s coalition, did not vote, while opposition parties slammed the move. Opposition leader Yair Lapid of the Yesh Atid party said that “while businesses collapse and hundreds of thousands of people are unemployed, the Knesset Finance Committee is dealing with one thing: tax benefits for Bibi,” Netanyahu’s nickname.
Indeed, even as citizens protested the lack of government response to their distress outside the Finance Ministry, the Knesset Finance Committee spent three hours on Tuesday debating the Netanyahu tax break.
Likud previously responded to reports about the Netanyahu tax clause by saying that the prime minister was not seeking anything that had not been granted to previous holders of the office.
“The prime minister is not asking for any special terms,” the party said in a statement. “The Finance Committee will require Netanyahu to pay tax exactly like previous prime ministers. There was an outrageous and personal attempt to charge Netanyahu with tax that was not required of any other prime minister. There will not be one law for Netanyahu and another for the previous prime ministers.”
Israeli taxpayers give the prime minister a raise
“When a worker gets benefits from his employer that are not directly linked to his job but are for personal benefit, then by law citizens of Israel need to pay tax on them,” said Tali Yaron Eldar, a former Tax Commissioner at the Israel Tax Authority, in a phone interview.
For example, if workers get a daily lunch or lunch vouchers, they need to pay tax on that benefit, she explained.
If the state paid for the renovation of Netanyahu’s house in Caesarea, she said, then as a citizen of Israel he would be bound to pay taxes on that benefit.
“The meaning of the decision on Tuesday is that now Israeli taxpayers will foot Netanyahu’s tax bill,” she said. It also means that Netanyahu has been given a salary hike, albeit indirectly, since his net pay is now higher.
Yaron Eldar, who worked at the Tax Authority 1988-2004 and headed it as commissioner in 2002-2004, said she is “not aware” of other prime ministers requesting similar breaks from the Tax Authority. “To the best of my knowledge there was never talk in the Tax Authority about the financing of private expenses,” she said.
Eran Lempert, a partner and co-head of the tax department at Yigal Arnon & Co., an Israeli law firm, said that practically all tax regimes in the world have provisions designed to tax employees with respect to perks granted to them by their employers, such as company cars.
The debate is usually whether it is the employer or the employee who benefits most from the specific perk, he said in a phone interview. In the case of the prime minister, it may be difficult to distinguish the private benefit from the public.
“In principle, taking into account the role of prime minister, it may be justified professionally for the state to pay his tax bill on these benefits,” Lempert said, Still, he said, the retroactive nature of the decision is problematic, as it becomes a personal law just for Netanyahu. Also, he said, “as far as we know, no other prime minister of Israel has ever faced such a tax assessment.” A tax assessment is the official demand that the Tax Authority issues to taxpayers.
The timing of the Netanyahu decision is also jarring, Lempert added.
“When people are fighting for survival, the Finance Committee finds the time to discuss retroactive benefits for the prime minister, when there are more urgent economic issues to deal with?” Lempert wondered rhetorically.
Next week, the Finance Committee is reportedly to convene again — this time to discuss benefits to be granted to Gantz, in his new status as Israel’s alternate prime minister.
“What the people of Israel see with this (tax benefit) approval is a detached government that does not care about the deep economic crisis caused by the coronavirus,” said Gayil Talshir, a professor of politics at the Hebrew University of Jerusalem who is completing a book about the Netanyahu governments and the structural changes they have wrought on Israel’s democracy.
“There are some 1 million people out of their jobs and not sure they are going to get back to work, and are facing real difficulties on how to finish the week, let alone the month,” she said. The government was broadcasting a “complete disregard” of this distress, she said.
‘Cartel politics’
Netanyahu and his family are already seen as leading a “lavish way of life,” she said, a perception underlined by the prime minister’s indictment for corruption. Netanyahu became Israel’s first serving prime minister to be taken to court on criminal charges when his trial opened in May for bribery, fraud and breach of trust in three cases.
“What we see as political scientists,” said Talshir, “is ruling elites getting away from the people — we call it cartel politics, where the cartel deals only with its own interests and is blind to the real needs of people.”
Israel’s small and large business owners have accused the government of dragging its feet regarding help during the crisis.
Israel could see a 50% jump in the number of businesses shutting down this year, to some 70,000, business data firm Dun & Bradstreet forecast in a report on the pandemic and its impact on the Israeli economy.
“This is not the right time” to discuss Netanyahu’s tax benefits, said Roee Cohen, the president of the Israel Federation of Small Business Organizations, which are among those hurting the most in the crisis.
“It is evidence of a disconnect that exists between the government and reality on ground, when there are 800,000 people who are unemployed and 100,000 self-employed who have not yet gotten back to work because the government shut down their businesses and are finding it hard to survive.”
When “people are desperate and helpless,” the government shouldn’t be discussing tax benefits for the prime minister, however justified the discussion may be, Cohen said. “Not when people don’t have food for their children. It is inconceivable.”
The prime minister and the government were elected to “solve problems, lead the people and bring them to a safe shore,” he said. “Only afterwards will there be time to deal with everything else. Today the task of the Knesset and ministers has to be just one thing: how to bring Israeli citizens to a safe place where people are not hungry for bread and are back in the workplace.”
This social and economic discontent is likely to lead to a new kind of protest against Netanyahu and his government — one that spans the whole political spectrum, warned Hebrew University’s Talshir.
It could also lead to citizens refusing to pay taxes, she said, and some protesters are already voicing this sentiment.
Still, a June 8 poll aired by Channel 12 showed that Netanyahu’s Likud party would grow to 40 seats if elections were held, and together with his right-wing religious allies could easily form a government without the Blue and White party.
Netanyahu is planning in July to unilaterally extend Israeli rule into the West Bank — a move that could break down his coalition government, which would lead to new elections.
“If Bibi is going to call an election” on the matter of annexing the West Bank, Talshir said, “he is going to be surprised by the wave of anti-politics and anti-politicians he will see. He will be playing with fire. His voters are from the low-income classes and they are suffering. And they see that he just wants more and more of money from public taxes, and all he thinks about is himself. This will backfire. I think he will find a backlash against him.”
Header: Illustrative — Self-employed people rally calling for financial support from the government outside the Israeli Knesset in Jerusalem, on April 19, 2020 (Yonatan Sindel/Flash90)
Source: Shoshanna Solomon – TOI