Knesset Panel Approves Compensation Terms for Businesses' War-related Damages

Lawmakers' add some improved terms, but mostly keep to limits set by the treasury.

Zvi Zrahiya
Zvi Zrahiya
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The town of Sderot was largely closed for business over the summer due to constant rocket fire.
The town of Sderot was largely closed for business over the summer due to constant rocket fire.Credit: Eliyahu Hershkowitz
Zvi Zrahiya
Zvi Zrahiya

After a fierce debate, the Knesset Finance Committee unanimously approved on Sunday the treasury’s plan for compensating businesses in southern Israel for war-related damage.

For the most part, lawmakers agreed to the Finance Ministry terms, which call for giving aid to businesses within 40 kilometers of the Gaza Strip border, the area that suffered the brunt of Hamas rocket attacks. But the Knesset members on the committee persuaded the treasury to increase the eligibility zone for farmers, to 20 kilometers from the border with the Strip, from seven kilometers.

At the last minute, the committee also approved several amendments to the general compensation plan. These included raising the amount businesses can receive as an advance, to 80% of the total payout, from 50% after Operation Pillar of Defense in 2012. Small businesses with an annual turnover of up to 1.5 million shekels ($439,000) will be entitled to an advance equal to 60% of their total claim.

In addition, the maximum compensation limit for any business was raised to 4 million shekels, from 3 million shekels, in the event Operation Protective Edge continues past August 15.

The Director General of the Israel Tax Authority, Moshe Asher, told committee members he was firmly against their proposal to expand the eligibility zone beyond the 40-kilometer area. “That would be a major development. If we allowed for compensation in communities near Rishon Letzion, we’d get over 250,000 claims,” Asher warned.

Responding to questions from MKs Stav Shaffir (Labor) and Gila Gamliel (Likud), tax authority Deputy Director General Eran Yaakov estimated that expanding the area of eligibility to 60 kilometers from the Gaza Strip would cost 5 billion shekels.

The agency estimates the cost to the government of the more moderate program at around one billion shekels. That will grow as the Finance Ministry is expected to present the Knesset Finance Committee in the coming days with a proposal for aiding the tourism industry and youth movements.

The compensation plan is only a small part of the costs of Protective Edge, which include military costs estimated at up to 200 million shekels a day and direct damage from rockets and mortar shells. In addition, businesses outside the area hit hardest by rocket attacks — most notably in the tourism industry, which suffered mass cancellations and the brief suspension of air service to Ben-Gurion International Airport — will receive no aid as of now.

Officials said the regulations, which were submitted by Finance Minister Yair Lapid, are designed to ensure fast and efficient compensation to cover any indirect damage suffered by businesses from July 8 — when Protective Edge formally was declared, even though rocket attacks on Israel preceded the date — until August 31 or the formal end of the operation.

War-related losses include the cost of salaries of workers who were absent either because they were ordered by the Home Front Command to stay home or because they had young children to watch. Businesses can also show they had war-related damage in the form of lost sales by submitting value-added tax reports.

The much smaller number of businesses within seven kilometers of Gaza will be subject to easier standards, including reports showing lower profits, officials said.

Asher rejected a petition from MKs and owners of large businesses to automatically compensate businesses with operations nationwide that have facilities in southern and central Israel. Asher said the businesses with facilities such as stores or factories in the south would be entitled to compensation if their auditors can show the fighting caused a loss of business.

Harel Wizel, principal of the Fox and American Eagle apparel chains, urged the government to provide full compensation for businesses within 60 kilometers of the Gaza Strip and partial compensation for those between 60 and 70 kilometers.

“I employ over 4,000 people. A small business has small expenses. A large business has many office staff, warehouse and logistics workers located in different places, and they won’t get compensation because they’re not in Sderot,” Wizel told the Finance Committee meeting.

“If a small business in the south that has two or three workers closes, the damage is small in scale. The damage to us is huge, even if we’re in central Israel. Our store in Ofakim was damaged. We formed a company that controls dozens of companies in the south, and the damage there exceeds 3 million shekels. The financial report [being required] has to encompass the while business, not just relate to each part of it,” Wizel said.

The treasury did agreed during the deliberations to change the criteria for compensating farmers in the south that suffered losses due to Operation Protective Edge. The agreement was reached by the heads of the Knesset agricultural caucus — MKs Zvulun Kalfa (Habayit Hayehudi) and Yitzhak Vaknin (Shas) — with the tax authority and the Agriculture Ministry.

Farmer whose fields or greenhouses are up to seven kilometers from the Gaza border would receive an 80% advance on their normal July-August earnings as well as deductions for other expenses (like packaging and sorting). For agricultural land between 7 and 20 kilometers from the border with Gaza the advance will be 50%, up from 40% in the previous draft.

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