All in Favor / When the Knesset Scents Elections

Outside the Knesset, snow was falling and strong winds were blowing. But that is not why the debate inside, during a hearing at the Knesset Finance Committee, turned stormy.

"The Finance Ministry is seeking to take the poor man's lamb from Kiryat Shmona when it proposes reducing tax benefits for the city's more well-to-do residents.

In the end, only the poor will live there," charged Kiryat Shmona Mayor Haim Barbivai at the meeting. The MKs were overwhelmingly sympathetic.

Committee members lambasted the recommendations prepared by a panel of treasury professionals headed by the deputy chief of the Tax Authority, Boaz Sofer.

The panel, which proposed new criteria for the tax breaks given to residents of outlying towns, was set up after the High Court of Justice demanded that the government formulate uniform criteria on the matter. The panel concluded that these criteria should be based on distance from the border, number of residents and the town's socioeconomic profile.

If the recommendations, which have not yet been approved by Finance Minister Roni Bar-On, are ever implemented, the number of towns eligible for tax breaks would grow from the current 160 to 457. But since the panel also decided not to increase the total amount of money earmarked for these tax breaks, many current recipients would see their benefits cut.

Kiryat Shmona is the clearest example of a town that would lose under the new system. Today, its residents receive a 25 percent tax break on income up to NIS 205,000 a year (about NIS 17,000 a month). Under the treasury's proposal, the tax break would fall to 10 percent, which would be applied only to annual income up to NIS 118,200 (NIS 9,850 per month).

Lawmakers look to 2009

But with MKs expecting Knesset elections to be advanced to mid-2009 (and municipal elections also scheduled, for this coming November), the treasury's proposal is unlikely to pass. It has no majority in the Finance Committee as it stands, and will thus apparently either be radically changed or pushed off until after the elections. The parties are happy to give bonuses to the periphery, but don't want to harm these communities' wealthiest residents.

Sofer argues that 80 percent of those who currently receive the tax breaks will see no reduction in their benefits. But Ma'alot-Tarshiha mayor and former MK Shlomo Buhbut, who heads the Forum of Front-Line Communities, has already warned the MKs what will happen if they support Sofer's plan. "Anyone who goes against the front-line [communities] will find himself out of the Knesset," he threatened earlier this week.

Moreover, some of the Finance Committee's leading members are themselves residents of the periphery. Coalition Chairman Eli Aflalo (Kadima) lives in Afula. He supports setting criteria for the tax breaks, but demands that the overall sum earmarked for this purpose be increased so that no one is hurt by the change. MK Yitzhak Vaknin (Shas) lives in Moshav Ya'ara, on the northern border; Shai Hermesh (Kadima) lives in Kfar Aza, in the South; and Avishay Braverman (Labor) has a longstanding interest in the Negev from his years as president of Ben-Gurion University.

The Sofer plan, declared one mayor who attended yesterday's meeting, will suffer the same fate as Interior Minister Meir Sheetrit's plan to merge various townships.

The MKs looked at each other and nodded in agreement. Just a day earlier, Sheetrit had announced that he is postponing the merger plan until after the elections.