Opposition MKs in the Knesset Finance Committee led by Yesh Atid MK Vladimir Beliak demanded on Sunday to hold 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 consequent to certain measures that the Finance Committee did not approve.
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.
All ministries’ budgets are expected to be impacted, including the Defense, National Security, 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 all planned tax measures are not enacted. Following new tax measures that did take effect at the beginning of the year, the 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, and enforcing cash laws on loans at financial institutions, including communal lending funds.
Automatic tax reporting for Airbnbs and twelve more steps that were intended to help fund the 2025 budget will also be part of the planned income tax measures.
The coalition’s intention is to pass the final voting of the Economic Arrangements Bill on Wednesday.
This 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
After that, the coalition intends to pass the budget bill itself at the beginning of next week (likely on Monday, March 24, or early Tuesday).
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 the Finance Committee’s legal adviser 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.
The pressure was already tangible on Sunday, as Finance Committee chairman MK Moshe Gafni (United Torah Judaism) put out a statement in response to what he called “obscure officials” in the Finance Ministry, who he said had criticized him for failing to pass the necessary measures to fund the 2025 budget in its entirety through his committee.
After listing the central measures that were approved by the committee, such as the Trapped Profits Law, an additional surtax, and a public sector salary freeze, 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 has the authority to decide what legislative procedures are best,” Gafni continued. “These are measures that have a marginal impact on the state budget 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.”
The Finance Committee chairman went on to say that the measures that the panel 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.”