Israeli Government Rejects Plan to Give 61 West Bank Settlements Tax Benefits

Coalition rejects proposal by Habayit Hayehudi party, but agrees to grant tax breaks to settlers in Hebron.

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Jewish residents of Hebron, the only settlement in a list of 61 that is to be given tax breaks. Credit: Michal Fattal

Coalition leaders rejected a plan to include 61 West Bank settlements on a list of municipalities enjoying income tax benefits over the next few years in a victory for Finance Committee Chairman Moshe Gafni (United Torah Judaism) and the treasury over Habayit Hayehudi.

Habayit Hayehudi and its leader, Education Minster Nafatli Bennett, had been seeking to include the settlements in the list, threatening a coalition crisis, but the plan was rejected at a meeting on Sunday with Prime Minister Benjamin Netanyahu and the heads of the coalition parties.

The only concession Bennett won in the meeting was to add Jews living in the mostly Palestinian city of Hebron to the list, which already includes other settlements in the Hebron Hills area. The participants at the meeting agreed to discuss including the other 61 settlements in the future, but no date for a meeting was set and it is not expected to happen anytime soon.

Bezalel Smotrich (Habayit Hayehudi) said the decision was further evidence that Netanyahu was not committed to building and expanding West Bank settlements. “It’s another step by the prime minster that hurt the settlements In the last two years, Bibi hasn’t enabled either planning or building, and now he’s removing Judea and Samaria from the tax-benefits lists.”

Gafni has been leading the effort to regulate the system for awarding income tax benefits for towns inside and outside the Green Line after several suits were filed with the High Court of Justice asserting that the system was inconsistent and unfair.

The Finance Ministry, which wants to make certain the costs of expanding the list of communities would not be excessive, said it could not come with a list that would meet the standards, leaving Gafni to make his own list. The breaks, which go mainly to towns in the north and south periphery of the country, cost about 800 million shekels ($206 million) annually.

Finance Minister Moshe Kahlon said he did not want to see the amount grow by more than 400 million shekels. Treasury officials estimated that Habayit Hayehudi's demand to add the 62 West Bank settlements would have cost 600 million shekels. Adding just Hebron to the list will cost the treasury 10 million shekels.

Gafni’s list, assembled over the past few weeks, removed communities that are considered well off based on economic and social indicators. He accused Habayit Hayehudi of trying to add the list of 62 West Bank settlements at the last minute and undermining his efforts to find criteria that would be approved by the finance committee and meet the High Court’s standards.

Smotrich had proposed an additional criterion for tax benefits that would have enabled the 62 settlements to be included, namely adding those the Defense Ministry classified as facing the greatest security risk.

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