Zero-VAT Law Delayed Again as Coalition Fissures Widen

Yisrael Beiteinu lawmakers demanding concessions from Lapid break up Knesset meeting.

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Finance Minister Yair Lapid.
Finance Minister Yair Lapid.Credit: Olivier Fitoussi

A Knesset Finance Committee meeting to take a re-vote on the zero-VAT law broke up in acrimony on Monday amid growing fissures in the coalition that threatened both the budget and the government’s future.

Yisrael Beiteinu’s MK Alex Miller led the initiative to break off the meeting by convening party MKs while deliberations were underway. Miller acted after Yisrael Beiteinu lawmakers learned that the treasury was refusing to back down on private medicine reforms contained in the Economic Arrangements Law that the party opposes.

“When we in the faction learned that there was no concrete program in connection with the disagreements among coalition partners and the Finance Ministry, it was important to act responsibly regarding anything linked to the state budget,” Miller said, insisting that his party still supported the measure.

“To pass the zero-VAT law, which will cost billions of shekels while delaying the budget, which is supposed to finance this law, would lead to economic chaos,” Miller said.

In response to Miller’s tactics, MK Nissan Slomiansky (Habayit Hayehudi), the committee’s chairman, ended the meeting and said he would reschedule deliberations. He said he expected to resume them tomorrow, assuming that the cracks in the coalition that brought about the delaying maneuver are resolved.

Foreign Minister Avigdor Lieberman, chairman of Yisrael Beiteinu, echoed Millers words, saying: “The budget is a single package – there are no separate items.” He added, however, that he didn’t want to force Israel into early elections.

The repeated delays in the zero-VAT legislation are aimed at Finance Minister Yair Lapid, who has marketed it as his flagship initiative to lower housing prices. The law would exempt many buyers from paying the 18% value-added tax when they buy a new home.

Yisrael Beiteinu is at the forefront of Knesset efforts to force the finance minister to drop the clauses in the treasury’s Economic Arrangements Law – legislation that accompanies the budget – that would put limits on private medicine.

The result has been a complicated game of politics, involving horse-trading of support for zero-VAT and the Arrangements Law, not to mention the controversy about the Jewish nationality law that has become a bone of contention between Justice Minister Tzipi Livni and right-wing coalition parties.

Likud sources insisted that Yesh Atid had agreed last week to split off elements of the Arrangements Law and give the sections dealing with the private medicine reform over to the Knesset Labor, Welfare and Health Committee, along with others sections concerning reform of the Jewish National Fund. They claimed Yesh Atid later backtracked, setting off a crisis.

Before the committee meeting broke up, lawmakers succeeded in voting on a change in the zero-VAT law that expands it to include single-family homes rather than just apartments. The change will mean that homebuyers in West Bank settlements, which have more single-family housing, will be able to enjoy the law’s benefits.

Opposition MKs also supported the amendment because it will mean homebuyers in the moshavim and other collective settlements will similarly benefit. Homes in these communities, especially in the periphery, usually sell for under the 1.6 million-shekels ($420,000) ceiling set by the proposed law.

Prime Minister Benjamin Netanyahu met on Monday with Lieberman in a bid to end the crisis and mend relations with Lapid, who heads Yesh Atid.

Source said the two parties were intent on finding a solution and that Netanyahu is backing them. While he is fed up with coalition bickering, the prime minister is not inclined to go into early elections. Both Yesh Atid and Yisrael Beiteinu, which are doing poorly in the polls, are also loathe to risk elections – a view Lapid confirmed at Monday’s Finance Committee meeting.

“This is not the time for elections and coalition maneuvering,” Lapid said. “I won’t form any alternative government. The public expects us to act responsibly. ... This is not the time for political interests. We can solve everything in two hours of focused discussions.”

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