Tax Authority gives in to MK pressure

The Knesset Finance Committee decided yesterday to enlarge compensation to small business owners in the North who were adversely affected by the recent war in Lebanon.

The unanimous decision awards these businesses, whose annual turnover is NIS 750,000 or less, compensation equivalent to 75 percent of lost revenue.

The amount will be calculated by comparing August 2006 turnover with August 2005 revenue. A previous decision had called for compensation up to 65 percent of the calculated loss for businesses with annual turnover of up to NIS 1.5 million. Businesses with turnover between NIS 750,000 and NIS 1.5 million are still eligible for the 65 percent rate.

The committee's decision will cost state coffers around NIS 50 million. The increased compensation will affect some 72,000 businesses.

Committee members during yesterday's hearing lobbied the tax authority to increase the rate of compensation.

Matza threatened to withdraw the compensation regulations from the committee and claimed there was a fear the compensation model would collapse, leading to High Court petitions against the committee's decision.

The approved arrangements cover two tracks. In the first track, employers will receive 145 percent per worker, and employees will chip in 20 percent at the expense of vacation days. In the second track, owners will receive compensation for the relative reduction in their August 2006 revenue between 65 percent and 75 percent as noted above. Larger businesses will be eligible for compensation between 45 and 55 percent up to a limit of NIS 3 million.

Knesset members pressured Matza to agree to a similar arrangement for July 2006, but he refused. Still, he did agree to requests by MKs Shai Hermes of Meretz and others to consider compensating kibbutz members working in dining halls, kindergartens and laundries. The MKs claimed that under current terms these members are ineligible to receive compensation.

Likewise, Matza acquiesced to committee chair MK Yaakov Litzman's request that non-profits that rely on at least a third of their revenue on sales and services to receive compensation.