Israel State Budget: What are the main reforms?

With the passage of the state budget and the Economic Arrangements Act (EAL) on Thursday, Israel is embarking on a wide range of economic reforms that will affect almost all sectors of society.
Described by Finance Minister Avigdor Liberman as the most social budget in Israel’s history, it includes dozens of new initiatives and reforms in imports, kashrut, bureaucracy, transportation infrastructure, retirement age for women, and banking, among others.

“These reforms express the vision that underlies the entire economic plan of the State of Israel, because without a vision, a nation loses moderation,” Liberman said, citing the Book of Proverbs, after the approval of the EAL.

Among the reforms that will come into effect are:

Imports: The reform will reduce the regulatory and bureaucratic burden on importers to reduce the cost of living.

Illustrative photo of Israeli money (credit: MARC ISRAEL SELLEM)

Under the new legislation, products that have been authorized for use in developed countries will no longer have to be re-inspected by the Israeli standardization authorities, allowing tens of thousands of food and consumer items to be available at lower prices. . This reform is expected to save the public about NIS 8 billion a year, the Finance Ministry said, although it remains to be seen how and if importers will pass those savings on to consumers.

Kashrut: Currently, the kashrut system is a monopoly controlled by the Chief Rabbinate. The reform proposes to open the kosher certification market to competition so that private organizations can also authorize kashrut. This is expected to reduce costs for companies and manufacturers and increase the level of service for consumers.

Regulation: A long-term system will be created to reduce excessive regulatory burdens on companies and promote smart regulation through an authority that will oversee the new procedures. The plan will foster growth in the business sector that is forecast to translate to around NIS 75 billion over a decade, or 6% growth in GDP per capita.

Retirement age for women: The retirement age for women in Israel, currently 62, is one of the lowest in the world. The OECD average is 65.8. The retirement age will be gradually raised to 65, over 11 years, with a significant budget earmarked to help women approaching that age. The retirement age for men, 67, will remain the same.

Banking: The open banking reform, which will make the banking sector more transparent and allow Israelis to compare the costs of different financial services, will take effect from June 2022. The new law will require financial institutions to They can show customers what financial services they consume, how much they pay, and how much they could save by switching to another provider.

Transportation: The level of road congestion in Israel costs the economy approximately NIS 40 billion per year due to lost work and leisure hours, traffic accidents and pollution. A congestion charge for driving in the Tel Aviv metropolitan area will help reduce traffic and raise around NIS 2.7 billion that will be used to fund further road improvements and build express lanes, the Finance Ministry said. The new parking policies will also allow local authorities to adjust parking prices based on demand.

Additionally, a massive NIS 150 billion plan to build a new subway train through the center is projected to save the economy between NIS 26b and NIS 34b. per year, the Finance Ministry said. Construction would begin around 2025 and could only be completed before 2032, disrupting traffic for years.

Housing: As part of the government’s multi-pronged plan to curb rising house prices, part of the office space will be converted to apartments, dormitories, and long-term rental housing, with the goal of adding thousands of housing units to short term to market. .

Another project will promote long-term rental projects by creating tax incentives to encourage investment in the development of rental building projects. A licensing reform will also make it easier to obtain building permits. In addition, urban renewal plans such as Tama 38 will be improved and promoted by local authorities, leading to an addition of around 4,500 projects per year.

Arab sector: some NIS 30b. It will be allocated for five years to improve conditions in the Arab sector, including investment in education and infrastructure.

Green energy: Legislative amendments will encourage the use of electric vehicles and remove barriers to the development of renewable energy power plants.

Supplemental Income: Seniors will be entitled to an increase of between NIS 473 and NIS 481 per month in their pension payments, bringing them within 70% of the minimum wage. Couples’ benefits will increase between NIS 745 and NIA 761 per month, so their total benefit will be at least NIS 5,865 per month. Disability benefits will also be increased, with an additional NIS 379 for disabled people.

Use of cash: To combat money laundering and tax evasion, cash payments to businesses now cannot exceed NIS 6,000, instead of the NIS 11,000 that previously existed, and cash transactions between individuals have a limit of NIS 15,000 instead of NIS 50,000. Individuals who buy cars from individuals can transfer up to NIS 50,000 in cash.

Business licensing processes will be simplified, as will requirements for day care centers.

The pension funds will be strengthened through a safety net issued by the state that guarantees a return of 5.15% per year.

Two laws that were previously included in the EAL, taxes on sugary drinks and disposable utensils, were withdrawn and independently passed.

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